Moore Stephens says HMRC may rethink its tonnage tax changes

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Leading accountant and shipping adviser, Moore Stephens, understands that Her Majesty’s Revenue & Customs (HMRC) has agreed to re-examine, in consultation with the shipping industry, its earlier intention to unilaterally reinterpret the UK Tonnage Tax rules to the potential detriment of many shipowners.

Widely disputed changes based on unspecified ‘legal advice’ were set out in HMRC’s tonnage tax manual in September 2009. These focused in particular on a reinterpretation of the strategic and commercial management tests that are fundamental to qualification for the tonnage tax regime.

UK tonnage tax is widely credited with having helped increase the UK fleet substantially since its introduction in 2000, when it was regarded as a model of clarity and stability. Then, as now, there was the need for a stable UK tax regime to both support British business and to encourage international businesses to operate and stay in the UK. Under the reinterpretation of the rules, some groups would not have qualified for the UK regime, despite having previously received HMRC clearance, with the result that internationally mobile shipping groups could consider leaving the UK.

Sue Bill, a tax partner with Moore Stephens, said: “HMRC’s reinterpretation of the rules created a lack of certainty and sent completely the wrong signals to international shipowners who had relocated to the UK to take advantage of its tonnage tax regime. It would therefore be excellent news if, as we understand to be the case, HMRC decides to consider the matter afresh, and to consult fully with the shipping industry. This would be seen as an indication that the government means to continue to act fairly and reasonably, not least by protecting shipowners who elected into the regime for a ten-year period based on the original HMRC rules and clearances.

“While no formal change to HMRC’s position has yet been confirmed, it is understood that any changes to the rules will now be assessed carefully. HMRC has warned that this re-examination may not result in any change in its position at all. But we are hopeful that HMRC and the UK government will let us have a more considered view.

“We have been working with the industry, and in particular the Chamber of Shipping, in campaigning for some time, and we are delighted at this positive development.”

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