Tonnage Tax
TAXES CONSOLIDATION ACT
Part 24A
Shipping: Tonnage Tax (ss. 697A-697Q)
697A.
Interpretation (Part 24A).
(1)In this Part and in Schedule 18B –
“bareboat charter terms” in relation to the charter of a ship, means the letting on charter of a ship for a stipulated period on terms which give the charterer possession and control of the ship, including the right to appoint the master and crew;
“chartered in” means –
(a)in relation to a single company, the letting on charter of a ship to the company otherwise than on bareboat charter terms, and
(b)in relation to a group of companies, the letting on charter of a ship otherwise than on bareboat charter terms to a qualifying company that is a member of the group by a person who is not a qualifying company that is a member of the group;
“company election” have the meanings respectively assigned to them by section 697D(1);
“group election” have the meanings respectively assigned to them by section 697D(1);
“commencement date” means the date of the passing of the Finance Act 2003;
“control” shall be construed in accordance with subsections (2) to (6) of section 432;
“initial period” has the meaning assigned to it by paragraph 2 of Schedule 18B;
“group of companies” means –
(a)all the companies of which an individual has control, or
(b)where a company that is not controlled by another person controls one or more other companies, that company and all the companies of which that company has control,
and references to membership of a group and group shall be construed accordingly;
“Member State” means a Member State of the European Communities;
“qualifying company” means a company –
(a)within the charge to corporation tax
(b)that operates qualifying ships, and
(c)which carries on the strategic and commercial management of those ships in the State;
“qualifying group” means a group of companies of which one or more members are qualifying companies;
“qualifying ship” means, subject to subsection (2), a self-propelled seagoing vessel (including a hovercraft) of 100 tons or more gross tonnage which is certificated for navigation at sea by the competent authority of any country or territory, but does not include a vessel (in this Part and in Schedule 18B referred to as a ‘vessel of an excluded kind’) which is –
(a)a fishing vessel or a vessel used for subjecting fish to a manufacturing or other process on board the vessel,
(b)a vessel, other than a vessel operated for bona fide commercial purposes and with an overnight passenger capacity (not including crew) of not less than 50 persons, of a kind whose primary use is for the purposes of sport or recreation,
(c)a harbour, estuary or river ferry,
(d)an offshore installation, including a mobile or fixed rig, a platform or other installation of any kind at sea,
(e)a tanker used for petroleum extraction activities (within the meaning of Chapter 2 of Part 24),
(f)a dredger, including a vessel used primarily as a floating platform for working machinery or as a diving platform,
(g)a tug in respect of which a certificate has not been given by the Minister for the Marine and Natural Resources certifying that in the opinion of the Minister the tug is capable of operating in seas outside the portion of the sea which is, for the purposes of the Maritime Jurisdiction Act 2021, the territorial sea of the State;
“tonnage tax” has the meaning assigned to it in section 697B;
“tonnage tax activities” in relation to a tonnage tax company, means activities carried on by the company in the course of a trade which consists of one or more than one of the activities described in paragraphs (a) to (g) and paragraphs (i) and (j) of the definition of ‘relevant shipping income’;
“tonnage tax asset” means an asset used wholly and exclusively for the purposes of the tonnage tax activities of a tonnage tax company;
“tonnage tax company” mean, respectively, a company or group in relation to which a tonnage tax election has effect;
“tonnage tax group” mean, respectively, a company or group in relation to which a tonnage tax election has effect;
“tonnage tax election” has the meaning assigned to it in section 697D(1);
“tonnage tax profits” in relation to a tonnage tax company, means the company’s profits for an accounting period calculated in accordance with section 697C;
“tonnage tax trade” in relation to a tonnage tax company, means a trade carried on by the company the income from which is within the charge to corporation tax and which consists solely of the carrying on of tonnage tax activities or, in the case of a trade consisting partly of the carrying on of such activities and partly of other activities, that part of the trade consisting solely of the carrying on of tonnage tax activities and which is treated under section 697L as a separate trade carried on by the company;
“relevant shipping income” in relation to a tonnage tax company, means the company’s income from –
(a)the carriage of passengers by sea in a qualifying ship operated by the company,
(b)the carriage of cargo by sea in a qualifying ship operated by the company,
(c)towage, salvage or other marine assistance by a qualifying ship operated by the company, but does not include income from any such work undertaken in a port or an area under the jurisdiction of a port authority,
(d)transport in connection with other services of a kind necessarily provided at sea by a qualifying ship operated by the company,
(e)the provision on board a qualifying ship operated by the company of goods or services ancillary to the carriage of passengers or cargo, but only to the extent that such goods or services are provided for consumption on board the qualifying ship,
(f)the granting of rights by virtue of which another person provides or will provide such ancillary services on board a qualifying ship operated by the company,
(g)other ship-related activities that are a necessary and integral part of the business of operating the company’s qualifying ships,
(i)the letting on charter of a qualifying ship for use for the carriage by sea of passengers and cargo where the operation of the ship and the crew of the ship remain under the direction and control of the company,
(j)the provision of ship management services for qualifying ships operated by the company,
(k)a dividend or other distribution of a company not resident in the State (in this Part referred to as the ‘overseas company’) in respect of which the conditions set out in section 697H(1) are met,
(l)gains treated as income by virtue of section 697J;
“relevant shipping profits” in relation to a tonnage tax company, means –
(a)the company’s relevant shipping income, and
(b)so much of the company’s chargeable gains as are excluded from the charge to tax by section 697N;
“renewal election” has the meaning assigned to it in paragraph 6 of Schedule 18B;
“75 per cent limit” has the meaning assigned to it by section 697E.
(2)A vessel is not a qualifying ship for the purposes of this Part if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land.
(3)
(a)References in this Part and in Schedule 18B to a company or group entering or leaving tonnage tax are references to its becoming or ceasing to be a tonnage tax company or group.
(b)References in this Part and in Schedule 18B to a company or group of companies being subject to tonnage tax are references to the company or group being entitled to calculate its profits in accordance with the provisions of this Part and that Schedule.
(4)Schedule 18B shall apply for the purposes of this Part.
697B.
Application.
Notwithstanding any other provision of the Tax Acts or the Capital Gains Tax Acts, this Part and Schedule 18B shall apply to provide an alternative method (in this Part referred to as ‘tonnage tax’) for computing the profits of a qualifying company for the purposes of corporation tax.
697C.
Calculation of profits of tonnage tax company.
(1)The tonnage tax profits of a tonnage tax company shall be charged to corporation tax in place of the company’s relevant shipping profits.
(2)Where the profits of a tonnage tax company would be relevant shipping income, any loss accruing to the company in respect of its tonnage tax activities or any loss which would, but for this subsection, be taken into account by virtue of section 79 in computing the trading income of the company shall not be brought into account for the purposes of corporation tax.
(3)A company’s tonnage tax profits for an accounting period in respect of each qualifying ship operated by the company shall be calculated in accordance with this section by reference to the net tonnage of each qualifying ship operated by the company and, for this purpose, the net tonnage of a ship shall be rounded down (if necessary) to the nearest multiple of 100 tons.
(4)The daily profit to be attributed to each qualifying ship operated by the company shall be determined by reference to the net tonnage of the ship as follows:
(a)for each 100 tons up to 1,000 tons, €1.00,
(b)for each 100 tons between 1,000 and 10,000 tons, €0.75,
(c)for each 100 tons between 10,000 and 25,000 tons, €0.50, and
(d)for each 100 tons above 25,000 tons, €0.25.
(5)The profit to be attributed to each qualifying ship for the accounting period shall be determined by multiplying the daily profit as determined under subsection (4) by –
(a)the number of days in the accounting period, or
(b)if the ship was operated by the company as a qualifying ship for only part of the period, by the number of days in that part of the accounting period.
(6)The amount of the company’s tonnage tax profits for the accounting period shall be the aggregate of the profit determined in respect of each qualifying ship operated by the company in accordance with subsection (5).
(7)If 2 or more companies are to be regarded as operators of a ship by virtue of a joint interest in the ship, or in an agreement for the use of the ship, the tonnage tax profits of each company shall be calculated as if each were entitled to a share of the profits proportionate to its share of that interest.
(8)If 2 or more companies are to be treated as the operator of a ship otherwise than as mentioned in subsection (7), the tonnage tax profits of each shall be computed as if each were the only operator.
697D.
Election for tonnage tax.
(1)Tonnage tax shall apply only if an election (in this Part and Schedule 18B referred to as a ‘tonnage tax election’) under this Part to that effect is made by a qualifying single company (in this Part and in Schedule 18B referred to as a ‘company election’) or by a qualifying group of companies (in this Part and in Schedule 18B referred to as a ‘group election’).
(2)
(a)Tonnage tax shall only apply to a company which is a member of a group of companies if the company joins in a group election which shall be made jointly by all the qualifying companies in the group.
(b)A group election shall have effect in relation to all qualifying companies in the group.
(3)A tonnage tax election shall be made only if the requirements of section 697E and 697F are met.
(4)Part 1 of Schedule 18B shall apply for the purposes of making and giving effect to an election under this Part.
697E.
Requirement that not more than 75 per cent of fleet tonnage is chartered in.
(1)It shall be a requirement (in this Part and Schedule 18B referred to as the ’75 per cent limit’) of entering or remaining within tonnage tax –
(a)in the case of a single company, that not more than 75 per cent of the net tonnage of the qualifying ships operated by it is chartered in,
(b)in the case of a group of companies, that not more than 75 per cent of the aggregate net tonnage of the qualifying ships operated by the members of the group that are qualifying companies is chartered in.
(2)A ship shall not be counted more than once in determining for the purposes of subsection (1) (b) the aggregate net tonnage of the qualifying ships operated by the members of a group that are qualifying companies.
(3)Where a tonnage tax election (not being a renewal election) is made before the end of the initial period and the 75 per cent limit is exceeded in the first relevant accounting period, the election shall be treated as never having been of any effect.
(4)Where a tonnage tax election (not being a renewal election) is made after the end of the initial period, then –
(a)if the 75 per cent limit is exceeded in the first relevant accounting period, the election shall not have effect in relation to that period,
(b)if the 75 per cent limit is exceeded in the first and second relevant accounting periods, the election shall not have effect in relation to either of those periods, and
(c)if the 75 per cent limit is exceeded in the first, second and third relevant accounting periods, the election shall be treated as never having been of any effect.
(5)For the purposes of subsection (3) and (4) the first, second or third relevant accounting period means –
(a)in relation to a single company, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of the company after its entry into tonnage tax, and
(b)in relation to a group of companies, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of a member of the group that would have been a tonnage tax company.
(6)Reference in this section to the 75 per cent limit being exceeded in an accounting period are to the limit being exceeded on average over the accounting period in question.
(7)
(a)If the 75 per cent limit is exceeded in 2 or more consecutive accounting periods of a tonnage tax company (in this subsection referred to as the ‘relevant company’) the Revenue Commissioners may give notice excluding the relevant company or the group of companies of which the relevant company is a member from tonnage tax.
(b)The effect of any such notice is that the relevant company’s tonnage tax election or the tonnage tax election of the group of which the relevant company is a member shall cease to be in force from such date as may be specified in the notice.
(c)The specified date shall not be earlier than the beginning of the accounting period of the relevant company that follows the second consecutive accounting period of that company in which the limit is exceeded.
(d)Subject to any arrangement under paragraph 22 of Schedule 18B, a notice under this subsection need only be given to the relevant company.
697F.
Requirement not to enter into tax avoidance arrangements.
(1)It shall be a condition of remaining within tonnage tax that a company is not a party to any transaction or arrangement that is an abuse of the tonnage tax regime.
(2)A transaction or arrangement shall be such an abuse as is referred to in subsection (1) if in consequence of its being, or having been, entered into the provisions of this Part and Schedule 18B may be applied in a way that results (or would but for this subsection result) in –
(a)a tax advantage (within the meaning of section 811, or section 811C, as the case may be) being obtained for –
(i)a company other than a tonnage tax company, or
(ii)a tonnage tax company in respect of its non-tonnage tax activities, or
(b)the amount of the tonnage tax profits of a tonnage tax company being artificially reduced.
(3)If a tonnage tax company is a party to any such transaction or arrangement as is referred to in subsection (1), the Revenue Commissioners may –
(a)if it is single company, give notice excluding it from tonnage tax;
(b)if it is a member of a group, subject to paragraph 22 of Schedule 18B, give notice to the tonnage tax company excluding the group from tonnage tax.
(4)The effect of such a notice as is referred to in subsection (3) –
(a)in the case of a single company, is that the company’s tonnage tax election shall cease to be in force from the beginning of the accounting period in which the transaction or arrangement was entered into, and
(b)in the case of a group, is that the group’s tonnage tax election shall cease to be in force from such date as may be specified in the notice, but the date so specified shall not be earlier than the beginning of the earliest accounting period in which any member of the group entered into the transaction or arrangement in question.
(5)The provisions of sections 697P apply where a company ceases to be a tonnage tax company by virtue of this section.
697G.
Appeals.
(1)A company aggrieved by a notice given to it under section 697F(3) may appeal the notice to the Appeal Commissioners, in accordance with section 949I, within the period of 30 days after the date of that notice.
(2)One appeal only may be made where a notice is given to a tonnage tax company that is a member of a group of companies, but the appeal may be made jointly by 2 or more members of the group.
697H.
Relevant shipping income: distributions of overseas shipping companies.
(1)The conditions referred to in paragraph (k) of the definition of ‘relevant shipping income’ in section 697A are –
(a)that the overseas company operates qualifying ships;
(b)that more than 50 per cent of the voting power in the overseas company is held by a company resident in a Member State, or that 2 or more companies each of which is resident in a Member State hold in aggregate more than 50 per cent of that voting power;
(c)that the 75 per cent limit is not exceeded in relation to the overseas company in any accounting period in respect of which the distribution is paid;
(d)that all the income of the overseas company is such that, if it were a tonnage tax company, it would be relevant shipping income;
(e)that the distribution is paid entirely out of profits arising at a time when –
(i)the conditions in paragraphs (a) to (d) were met, and
(ii)the tonnage tax company was subject to tonnage tax;
and
(f)the profits of the overseas company out of which the distribution is paid are subject to a tax on profits (in the country of residence of the company or elsewhere, or partly in that country and partly elsewhere).
(2)A dividend or other distribution of an overseas company which is made out of profits which are referable to a dividend or other distribution in relation to which the conditions of subsection (1) are met shall be deemed for the purposes of this Part to be a dividend or other distribution in respect of which the conditions in subsection (1) are met.
(3)Section 440 shall not apply to dividends and other distributions of an overseas company which is relevant shipping income of a tonnage tax company.
697I. Relevant shipping income: cargo and passengers.
Deleted from 28 March 2003
[deleted]
697J.
Relevant shipping income: foreign currency gains.
(1)This section shall apply to –
(a)any gain, whether realised or unrealised, attributable to a relevant monetary item (within the meaning of section 79) which would but for this Part be taken into account in computing the trading income of a company’s tonnage tax trade in accordance with section 79, and
(b)any gain, whether realised or unrealised, attributable to a relevant contract (within the meaning of section 79) which would but for this Part be taken into account in computing the trading income of a company’s tonnage tax trade in accordance with section 79.
(2)Where this section applies to any gain, the gain shall be treated as income for the purposes of the definition of ‘relevant shipping income’ in section 697A.
697K.
General exclusion of investment income.
(1)Income from investments shall not be relevant shipping income, and for this purpose ‘income from investments’ includes any income chargeable to tax under Case III, IV or V of Schedule D or under Schedule F.
(2)To the extent that an activity gives rise to income from investments it shall not be regarded as part of a company’s tonnage tax activities.
(3)Subsection (1) shall not apply to income that is relevant shipping income under sections 697H.
697L.
Tonnage tax trade.
(1)Subject to section 697M, where in an accounting period a tonnage tax company carries on as part of a trade tonnage tax activities, those activities shall be treated for the purposes of the Corporation Tax Acts (other than any provision of those Acts relating to the commencement or cessation of a trade) as a separate trade distinct from all other activities carried on by the company as part of the trade.
(2)An accounting period of a company shall end (if it would not otherwise do so) when the company enters or leaves tonnage tax.
(3)A company to which subsection (1) applies shall, as respects any activities which are treated by virtue of that subsection as a separate trade distinct from all other activities carried on by that company as part of its trade, comply with all the requirements of the Tax Acts and the Capital Gains Tax Acts as respects those activities regarding the computation of tax and the keeping of records separate from any other activity carried on by that company.
697LA.
Transactions between associated persons and between tonnage tax trade and other activities of same company.
(1)In this section –
‘control’ shall be construed in accordance with section 11;
‘losses’ includes amounts in respect of which relief may be given in accordance with section 83(3) and Part 12;
‘transaction’ includes any agreement, arrangement or understanding of any kind (whether or not it is, or is intended to be, legally enforceable).
(2)Where –
(a)provision is made or imposed as between a tonnage tax company and another company by means of a transaction,
(b)the results of the transaction are taken into account in computing the tonnage tax company’s relevant shipping income,
(c)at the time of the transaction –
(i)one of the companies is directly or indirectly under the control of the other, or
(ii)both of the companies are, directly or indirectly, under the control of the same person or persons,
and
(d)the relevant shipping income of the tonnage tax company is greater than it would be if the parties to the transaction had been independent parties dealing at arm’s length,
then, the income or losses of both companies shall be computed for any purpose of the Tax Acts as if the consideration in the transaction had been that which would have obtained if the transaction had been a transaction between independent persons dealing at arm’s length.
(3)Subsection (2) shall apply in relation to a tonnage tax company where provision is made or imposed as between the company’s tonnage tax trade and other activities carried on by the company as if
(a)that trade and those other activities were carried on by two different persons,
(b)those persons had entered into a transaction, and
(c)the two persons were both controlled by the same person at the time of the making or imposition of the provision.
(4)A company to which subsection (2) or (3) applies shall keep for a period not less than 6 years sufficient documentation to prove how prices and terms have been determined in a transaction to which that subsection applies, including a written and detailed explanation of the pricing principles it has applied in relation to any such business transaction.
(5)An officer of the Revenue Commissioners may by notice in writing require a company to which subsection (2) or (3) applies to furnish him or her with such information, particulars or documentation as may be necessary for that officer to establish whether or not the company has complied with this section.
(6)Section 1052 shall apply to a failure to comply with subsection (5) as it applies to a failure to deliver a return referred to in that section.
(7)Sections 900 and 901 shall apply to records under this section as if they were books, records or documents within the meaning of section 900.
(8)Nothing in this section is to be construed as affecting the computation of a company’s tonnage tax profits.
697LB.
Treatment of finance costs.
(1)
(a)In this section –
‘deductible finance costs outside the tonnage tax trade’ means –
(i)in relation to a tonnage tax company, the total of the amounts that may be taken into account in respect of finance costs in calculating for the purpose of corporation tax the company’s profits other than relevant shipping profits, and
(ii)in relation to a group of companies, so much of the group’s finance costs as may be taken into account in calculating for the purposes of corporation tax –
(I)in the case of a group member which is a tonnage tax company, the company’s profits other than relevant shipping profits, and
(II)in the case of a group member which is not a tonnage tax company, the company’s profits;
‘finance costs’, in relation to a company, means the cost of debt finance for that company, including –
(i)any interest expense which gives rise to a deduction under section 81 or relief under Part 8,
(ii)any gain or loss referred to in section 79 in relation to debt finance,
(iii)the finance cost implicit in a payment under a finance lease,
(iv)the finance cost payable on debt factoring or on any similar transaction, and
(v)any other costs arising from what would be considered on generally accepted accounting practice to be a financing transaction;
‘finance lease’, in relation to finance costs, means any arrangements that provide for machinery or plant to be leased or otherwise made available by a person (in this definition referred to as the ‘lessor’) to another person such that, in cases where the lessor and persons connected with the lessor are all companies resident in the State –
(i)the arrangements, or
(ii)the arrangements in which they are comprised,
fall, in accordance with generally accepted accounting practice, to be treated in the accounts, including any consolidated group accounts relating to two or more companies of which that company is one, of one or more of those companies as a finance lease or as a loan;
‘total finance costs’ means –
(i)in relation to a tonnage tax company, so much of the company’s finance costs as could, if there were no tonnage tax election, be taken into account in calculating the company’s profits for the purposes of corporation tax, and
(ii)in relation to a group of companies, so much of the group’s finance costs as could, if there were no tonnage tax election, be taken into account in calculating for the purposes of corporation tax the profits of any group member.
(b)For the purposes of this section, where, in the case of a group of companies, an accounting period of a company does not coincide with the corresponding accounting period of another group company or companies, then the periods shall be matched on whatever basis appears to be just and reasonable.
(2)Where it appears, in relation to an accounting period of a tonnage tax company (not being a member of a group of companies) which carries on tonnage tax activities and which also carries on other activities, that the company’s deductible finance costs outside the tonnage tax trade exceed a fair proportion of the company’s total finance costs, then an adjustment as determined in accordance with subsection (3) shall be made in computing the company’s profits for corporation tax purposes for that accounting period.
(3)
(a)The proportion of the company’s deductible finance costs outside the tonnage tax trade which are to be treated as exceeding a fair proportion of the company’s total finance costs shall be determined on a just and reasonable basis.
(b)The just and reasonable determination referred to in paragraph (a) shall be made by reference to the extent to which the debt finance of the company, in respect of which the company’s total finance costs are incurred, is applied in such a way that any profits arising, directly or indirectly, would be relevant shipping profits.
(4)Where an adjustment is to be made under subsection (2), an amount equal to the excess determined in accordance with subsection (3) shall be taken into account in computing the trading income of the company’s non-tonnage tax activities for the accounting period in respect of which the adjustment arises.
(5)Where it appears, in relation to an accounting period of a tonnage tax company (being a member of a tonnage tax group) where the activities carried on by the members of the group include activities other than the carrying on of a tonnage tax trade or tonnage tax trades, that the group’s deductible finance costs outside the tonnage tax trade exceed a fair proportion of the group’s total finance costs, then an adjustment as determined in accordance with subsection (6) shall be made in computing the company’s profits for corporation tax purposes for that accounting period.
(6)
(a)The proportion of the group’s deductible finance costs outside the tonnage tax trade which are to be treated as exceeding a fair proportion of the company’s total finance costs shall be determined on a just and reasonable basis.
(b)The just and reasonable determination referred to in paragraph (a) shall be made by reference to the extent to which the debt finance of the group, in respect of which the group’s total finance costs are incurred, is applied in such a way that any profits arising, directly or indirectly, would be relevant shipping profits.
(7)Where an adjustment is to be made under subsection (5), an amount equal to the proportion of the excess determined in accordance with subsection (6) which the company’s tonnage tax profits bears to the tonnage tax profits of all the members of the group shall be taken into account in computing the trading income of the company’s non-tonnage tax activities for the accounting period in respect of which the adjustment arises.
(8)No adjustment shall be made under this section if –
(a)in calculating for a period a company’s deductible finance costs outside the tonnage tax trade of the company, or
(b)in calculating for a period a group’s deductible finance costs outside the tonnage tax trades of the group,
the amount taken into account in respect of costs and losses is exceeded by the amount taken into account in respect of profits and gains.
697M.
Exclusion of reliefs, deductions and set-offs.
(1)No relief, deduction or set-off of any description is allowed against the amount of a company’s tonnage tax profits.
(2)
(a)When a company enters tonnage tax, any losses that have accrued to it before entry and are attributable –
(i)to activities that under tonnage tax become part of the company’s tonnage tax trade, or
(ii)to a source of income that under tonnage tax becomes relevant shipping income,
shall not be available for loss relief in any accounting period beginning on or after the company’s entry into tonnage tax.
(b)Any apportionment necessary to determine the losses so attributable shall be made on a just and reasonable basis.
(c)In paragraph (a) ‘loss relief’ includes any means by which a loss might be used to reduce the amount in respect of which that company, or any other company, is chargeable to tax.
(3)
(a)Any relief or set-off against a company’s tax liability for an accounting period shall not apply in relation to so much of that tax liability as is attributable to the company’s tonnage tax profits.
(b)Relief to which this subsection applies includes, but is not limited to, any relief or set-off under section 826, 828 or Part 2 of Schedule 24.
(c)This subsection shall not apply to any set-off under section 24(2) or 25(3).
697N.
Chargeable gains.
(1)Where for one or more continuous periods of at least 12 months part of an asset has been used wholly and exclusively for the purposes of the tonnage tax activities of a tonnage tax company and part has not, this section shall apply as if the part so used were a separate asset.
(2)Where subsection (1) applies, any necessary apportionment of the gain or loss on the disposal of the whole asset shall be made on a just and reasonable basis.
(3)
(a)When an asset is disposed of that is or has been a tonnage tax asset –
(i)any gain or loss on the disposal, which but for this paragraph would have been the amount of the chargeable gain or the allowable loss, shall be a chargeable gain or allowable loss only to the extent (if any) to which it is referable to periods during which the asset was not a tonnage tax asset, and
(ii)any such chargeable gain or allowable loss on a disposal by a tonnage tax company shall be treated as arising otherwise than in the course of the company’s tonnage tax trade.
(b)For the purposes of paragraph (a), the proportion of the gain or loss referable to periods during which the asset was not a tonnage tax asset shall be determined by the formula:
(P – T)
P
where
Pis the total length of the period since the asset was created or, if later, the last third-party disposal, and
Tis the length of the period (or the aggregate length of the periods) since –
(I)the asset was created, or
(II)if later, the last third-party disposal,
during which the asset was a tonnage tax asset.
(c)In paragraph (b) a ‘third-party disposal’ means a disposal (or deemed disposal) that is not treated as one on which neither a gain nor a loss accrues to the person making the disposal.
(4)A tonnage tax election shall not affect the deduction under section 31 as applied by section 78(2) of relevant allowable losses (within the meaning of section 78) that accrued to a company before it became a tonnage tax company.
697O.
Capital allowances: general.
(1)A company’s tonnage tax trade shall not be treated as a trade for the purposes of determining the company’s entitlement to capital allowances under Part 9 or under any other provision which is to be construed as one with that Part, but nothing in this subsection shall be taken as preventing the making of a balancing charge under those provisions as applied by Schedule 18B.
(2)Notwithstanding any other provision of the Tax Acts, Part 9 insofar as it relates to machinery or plant shall not apply to machinery or plant provided for leasing by a lessor (within the meaning of section 403) who is an individual to a lessee (within the meaning of section 403) for use in a tonnage tax trade carried on or to be carried on by the lessee.
(3)Part 3 of Schedule 18B shall apply for the purposes of applying the provisions of Part 9 or any other provision which is to be construed as one with that Part for the purposes of a tonnage tax trade of a tonnage tax company.
697P.
Withdrawal of relief etc. on company leaving tonnage tax.
(1)This section shall apply where a company ceases to be a tonnage tax company –
(a)on ceasing to be a qualifying company for reasons relating wholly or mainly to tax, or
(b)under section 697F.
(2)Where this section applies, section 697N shall apply in relation to chargeable gains (within the meaning of the Capital Gains Tax Acts), but not losses, on all relevant disposals as if the company had never been a tonnage tax company and for this purpose a ‘relevant disposal’ means a disposal –
(a)on or after the day on which the company ceases to be a tonnage tax company, or
(b)at any time during the period of 6 years immediately preceding that day when the company was a tonnage tax company.
(3)Where subsection (2) operates to increase the amount of the chargeable gain on a disposal made at a time within the period mentioned in subparagraph (2)(b), the gain is treated to the extent of the increase –
(a)as arising immediately before the company ceased to be a tonnage tax company, and
(b)as not being relevant shipping profits of the company.
(4)No relief, deduction or set-off of any description shall be allowed against the amount of that increase or the corporation tax charged on that amount.
(5)Where this section applies and in a relevant accounting period during which the company was a tonnage tax company the company was liable to a balancing charge in relation to which paragraph 16 or 17, as appropriate, of Schedule 18B applied to reduce the amount of the charge, then the company shall be treated as having received an additional amount of profits chargeable to corporation tax equal to the aggregate of the amounts by which those balancing charges were reduced.
(6)For the purposes of subsection (5) a ‘relevant accounting period’ means an accounting period ending not more than 6 years before the day on which the company ceased to be a tonnage tax company.
(7)The additional profits referred to in subsection (5) shall be treated –
(a)as arising immediately before the company ceased to be a tonnage tax company, and
(b)as not being relevant shipping profits of the company.
(8)No relief, deduction or set-off of any description shall be allowed against those profits or against the corporation tax charged on them.
697Q.
Ten year disqualification from re-entry into tonnage tax.
(1)This section shall apply in every case where a company ceases to be a tonnage tax company otherwise than on the expiry of a tonnage tax election.
(2)Where this section applies –
(a)a company election made by a former tonnage tax company shall be ineffective if made before the end of the period of 10 years beginning with the date on which the company ceased to be a tonnage tax company, and
(b)a group election that –
(i)is made in respect of a group whose members include a former tonnage tax company, and
(ii)would result in that company becoming a tonnage tax company,
shall be ineffective if made before the end of the period of 10 years beginning with the date on which that company ceased to be a tonnage tax company.
(3)This section shall not prevent a company becoming a tonnage tax company under and in accordance with the rules in Part 4 of Schedule 18B.
(4)In this section ‘former tonnage tax company’ means a company that is not a tonnage tax company but has previously been a tonnage tax company.
Schedule 18B Tonnage Tax
Schedule 18B, Part 1 Matters relating to election for tonnage tax (paras. 1-6)
Method of making and giving effect to an election
1.
(1)A tonnage tax election shall be made by notice to the Revenue Commissioners and shall be made by means of a form prescribed for that purpose by them.
(2)
(a)The notice shall be supported by such information, particulars and documentation (in this paragraph referred to as ‘information’) as the Revenue Commissioners may require for the purposes of this Part and the election shall not take effect until such information is provided to the satisfaction of the Revenue Commissioners.
(b)Without prejudice to the generality of this subparagraph, the information referred to in clause (a) may include information relating to the matters specified in subparagraph (3).
(3)
(a)The information which may be requested from an applicant company by the Revenue Commissioners for the purposes of subparagraph (2) includes –
(i)documentation on legal status, constitution, memorandum and articles of association, and certificate of incorporation of the company,
(ii)business plans or similar documents of the company,
(iii)the name and address of each of the directors of the company,
(iv)the name and address of each of the beneficial shareholders of the company and the number and class of shares held by each,
(v)details of the qualifying ships owned or leased by the company,
(vi)particulars of how the strategic and commercial management of the qualifying ships is carried on by the company in the State,
(vii)in the case of a group election, particulars of all the companies in the group, their respective shareholdings, and the flow of funds between all of the companies in the group.
(b)For the purposes of this subparagraph, ‘applicant company’ means a company that makes an election by notice to the Revenue Commissioners in accordance with subparagraph (1).
When election may be made
2.
(1)A tonnage tax election may be made at any time before the end of the period (in this Schedule referred to as the ‘initial period’) of 36 months beginning on the commencement date.
(2)After the end of the initial period a tonnage tax election may only be made in the circumstances specified in subparagraphs (3) and (4).
(3)
(a)An election may be made after the end of the initial period in respect of a single company that becomes a qualifying company and has not previously been a qualifying company at any time on or after the commencement date.
(b)Any election under this subparagraph shall be made before the end of the period of 36 months beginning with the day on which the company became a qualifying company.
(4)
(a)An election may be made after the end of the initial period in respect of a group of companies that becomes a qualifying group of companies by virtue of a member of the group becoming a qualifying company, not previously having been a qualifying company, at any time on or after the commencement date.
(b)This subparagraph shall not apply if the group of companies –
(i)was previously a qualifying group at any time on or after the commencement date, or
(ii)is substantially the same as a group that was previously a qualifying group of companies at any such time.
(c)An election under this subparagraph shall be made before the end of the period of 36 months beginning with the day on which the group of companies became a qualifying group of companies.
(5)This paragraph shall not prevent an election being made under Part 4.
(6)The Minister for Finance may by order provide for further periods within which a tonnage tax election may be made, and any such order may provide for this Part of this Schedule to apply, with any necessary modifications, as appears to the Minister to be appropriate in relation to such further periods as it applies in relation to the initial period.
When election takes effect
3.
(1)Subject to this paragraph, a tonnage tax election shall have effect from the beginning of the accounting period in which it is made.
(2)A tonnage tax election shall not have effect in relation to an accounting period beginning before 1 January 2002, but where a tonnage tax election would have effect under subparagraph (1) for an accounting period beginning before 1 January 2002 the election shall have effect from the beginning of the accounting period following that in which it is made.
(3)The Revenue Commissioners may allow a tonnage tax election made before the end of the initial period to have effect from the beginning of an accounting period earlier than that in which it is made (but not one beginning before 1 January 2002).
(4)The Revenue Commissioners may allow a tonnage tax election made before the end of the initial period to have effect from the beginning of the accounting period following that in which it is made or, where the Revenue Commissioners determine that due to exceptional circumstances, unrelated to the avoidance or reduction of tax, it is commercially impracticable for the election to take effect, the beginning of the next following accounting period.
(5)In the case of a group election made in respect of a group of companies where the members have different accounting periods, subparagraph (1) or, if appropriate, subparagraph (3) or (4) shall apply in relation to each qualifying company by reference to that company’s accounting periods.
(6)Subject to section 697E(4), a tonnage tax election under paragraph 2(3) or (4) shall have effect from the time at which the company in question became a qualifying company.
Period for which election is in force
4.
(1)Subject to subparagraphs (2) and (3) and paragraph 6(3), a tonnage tax election shall remain in force until it expires at the end of the period of 10 years beginning –
(a)in the case of a company election, with the first day on which the election has effect in relation to the company, and
(b)in the case of a group election, with the first day on which the election has effect in relation to any member of the group.
(2)A tonnage tax election shall cease to be in force –
(a)in the case of a company election, if the company ceases to be a qualifying company, and
(b)in the case of a group election, if the group of companies ceases to be a qualifying group.
(3)A tonnage tax election may also cease to be in force under Part 4.
Effect of election ceasing to be in force
5.A tonnage tax election that ceases to be in force shall cease to have effect in relation to any company.
Renewal election
6.
(1)At any time when a tonnage tax election is in force in respect of a single company or group of companies a further tonnage tax election (in Part 24A and this Schedule referred to as a ‘renewal election’) may be made in respect of that company or group.
(2)Section 697D and paragraphs 1, 4 and 5 shall apply in relation to a renewal election as they apply in relation to an original tonnage tax election.
(3)A renewal election supersedes the existing tonnage tax election.
Schedule 18B, Part 2 Matters relating to qualifying ships (paras. 7-9)
Company temporarily ceasing to operate qualifying ships
7.
(1)This paragraph shall apply where a company temporarily ceases to operate any qualifying ships.
(2)This paragraph shall not apply where a company continues to operate a ship that temporarily ceases to be a qualifying ship.
(3)If a company which temporarily ceases to operate any qualifying ships gives notice to the Revenue Commissioners stating –
(a)its intention to resume operating qualifying ships, and
(b)its wish to remain within tonnage tax,
the company shall be treated for the purposes of Part 24A and this Schedule as if it had continued to operate the qualifying ship or ships it operated immediately before the temporary cessation.
(4)The notice must be given on or before the specified return date for the chargeable period (within the meaning of Part 41A) of the company in which the temporary cessation begins.
(5)This paragraph shall cease to apply if and when the company –
(a)abandons its intention to resume operating qualifying ships, or
(b)again in fact operates a qualifying ship.
Meaning of operating a ship
8.
(1)Subject to this paragraph, a company is regarded for the purposes of Part 24A and this Schedule as operating any ship owned by, or chartered to, the company.
(2)
(a)A company shall not be regarded as the operator of a ship where part only of the ship has been chartered to it.
(b)For the purpose of subparagraph (a), a company shall not be taken as having part only of a ship chartered to it by reason only of the ship being chartered to it jointly with one or more other persons.
(3)Except as provided by subparagraphs (4) and (5), a company shall not be regarded as the operator of a ship that has been chartered out by it on bareboat charter terms.
(4)
(a)A company shall be regarded as operating a ship that has been chartered out by it on bareboat charter terms if the person to whom it is chartered is not a third party.
(b)For the purpose of subparagraph (a), a ‘third party’ means –
(i)in the case of a single company, any other person,
(ii)in the case of a member of a group of companies –
(I)any member of the group that is not a tonnage tax company (and does not become a tonnage tax company by virtue of the ship being chartered to it), or
(II)any person who is not a member of the group.
(5)A company shall not be regarded as ceasing to operate a ship that has been chartered out by it on bareboat charter terms if –
(a)the ship is chartered out because of short-term over-capacity, and
(b)the term of the charter does not exceed 3 years.
(6)A company shall be regarded as operating a qualifying ship for the purposes of the activity described in paragraph (j) of the definition of ‘relevant shipping income’ in section 697A if that company has entered contractual arrangements in relation to the provision of ship management services for the qualifying ship for a stipulated period and the terms of those arrangements give the company –
(a)possession and control of the ship,
(b)control over the day to day management of the ship, including the right to appoint the master and crew and route planning,
(c)control over the technical management of the ship, including decisions on its repair and maintenance,
(d)control over the safety management of the ship, including ensuring that all necessary safety and survey certificates are current,
(e)control over the training of the officers and crew of the ship, and
(f)the management of the bunkering, victualling and provisioning of the ship,
and those terms are actually implemented for the period in which the company provides ship management services in respect of that ship.
Qualifying ship used as vessel of an excluded kind
9.
(1)A qualifying ship that begins to be used as a vessel of an excluded kind ceases to be a qualifying ship when it begins to be so used, but if –
(a)a company operates a ship throughout an accounting period of the company, and
(b)in that period the ship is used as a vessel of an excluded kind on not more than 30 days, that use shall be disregarded in determining whether the ship is a qualifying ship at any time during that period.
(2)In the case of an accounting period shorter than a year, the figure of 30 days in subparagraph (1) shall be proportionately reduced.
(3)If a company operates a ship during part only of an accounting period of the company, subparagraph (1) shall apply as if for 30 days, or the number of days substituted by subparagraph (2), there were substituted the number of days that bear to the length of that part of the accounting period the same proportion that 30 days bears to a year.
Schedule 18B, Part 3 Capital Allowances, Balancing Charges and Related Matters (paras. 10-20)
Plant and machinery used wholly for tonnage tax trade
10.
(1)
(a)This subparagraph shall apply where, on a company’s entry to tonnage tax, machinery or plant, in respect of which capital expenditure was incurred by the company before its entry into tonnage tax, is to be used wholly and exclusively for the purposes of the company’s tonnage tax trade.
(b)Where this subparagraph applies –
(i)no balancing charge or balancing allowance shall be made under section 288 as a result of the machinery or plant concerned being used for the purposes of the company’s tonnage tax trade,
(ii)any allowance attributable to the machinery or plant referred to in subparagraph (a) which, but for this clause, would have been made to the company under Part 9 or under any provision that is construed as one with that Part for any accounting period in which the company is a tonnage tax company shall not be made, and
(iii)section 287 shall not apply as respects any accounting period during which the machinery or plant has been used wholly and exclusively for the purposes of a company’s tonnage tax trade.
(2)
(a)This subparagraph shall apply where the machinery or plant referred to in subparagraph (1)(a) begins to be used wholly or partly for purposes other than those of the company’s tonnage tax trade.
(b)Where this subparagraph applies and the asset begins to be wholly used for purposes other than the company’s tonnage tax trade –
(i)no balancing allowance shall be made on the company under section 288(2) for any period in which the company is subject to tonnage tax,
(ii)for the purposes of making a balancing charge under section 288 on the happening of any of the events referred to in subsection (1) of that section –
(I)section 296 shall not apply as respects any accounting period of a company in which the company is subject to tonnage tax,
(II)where the event occurs at a time when the company is subject to tonnage tax, the amount of the capital expenditure of the company still unallowed at the time of the event shall, notwithstanding section 296, be the amount of the capital expenditure of the company on the provision of the machinery or plant which was still unallowed at the time the company’s election into tonnage tax had effect, and
(III)where the event occurs at a time when the company is subject to tonnage tax, the references in section 288 to sale, insurance, salvage or compensation moneys and the reference in section 289(3)(b) to the open-market price of the machinery or plant shall be taken to be references to the least of –
(A)the actual cost to the company of the machinery or plant for the purpose of the trade carried on by the company,
(B)the price the machinery or plant would have fetched if sold in the open market at the time the company’s election into tonnage tax had effect, and
(C)the sale, insurance, salvage or compensation moneys (within the meaning of Part 9) arising from the event or, where paragraph (b) of section 289(3) applies, the open-market price of the machinery or plant (within the meaning of that section) at the time of the event.
(c)Where this subparagraph applies and the asset begins to be partly used for purposes other than the company’s tonnage tax trade –
(i)the machinery or plant shall be treated as 2 separate assets one in use wholly and exclusively for the purposes of the tonnage tax trade and the other in use wholly and exclusively for purposes other than the company’s tonnage tax trade,
(ii)subparagraph (2)(b) shall apply in relation to the part of the asset treated by virtue of this subparagraph as in use wholly and exclusively for the purposes of the tonnage tax trade as it applies in relation to machinery or plant which begins to be used wholly for purposes other than the company’s tonnage tax trade,
(iii)in determining the amount of any capital allowance or balancing charge, if any, to be made under Part 9 or under any other provision to be construed as one with that Part in relation to the part of the asset treated by virtue of this subparagraph as in use wholly and exclusively for purposes other than the company’s tonnage tax trade regard shall be had to all relevant circumstances and, in particular, to the extent of the use, if any, of the machinery or plant for the purposes of a trade, and there shall be made to or on the company, in respect of that trade, an allowance of such an amount or a balancing charge of such an amount, as may be just and reasonable.
Plant and machinery used partly for purposes of tonnage tax trade
11.
(1)This paragraph shall apply where, on a company’s entry into tonnage tax, machinery or plant, in respect of which capital expenditure was incurred by the company before its entry into tonnage tax, is to be used partly for the purposes of the company’s tonnage tax trade and partly for purposes other than the company’s tonnage tax trade.
(2)Where this paragraph applies –
(a)the machinery or plant referred to in subparagraph (1) shall be treated as 2 separate assets one in use wholly and exclusively for the purposes of the tonnage tax trade and the other in use wholly and exclusively for the purposes of the other trade of the company,
(b)subject to clause (c), in determining the amount of –
(i)any capital allowance or balancing charge to be made in respect of that part of the asset treated as in use wholly and exclusively for purposes other than the company’s tonnage tax trade under Part 9 or under any provision which is to be construed as one with that Part, or
(ii)the amount of any balancing charge to be made for the purpose of the tonnage tax trade under Part 9, or under any provision which is to be construed as one with that Part, as applied by this Schedule,
regard shall be had to all relevant circumstances and, in particular, to the extent of the use of the machinery or plant for the purposes of a trade other than the tonnage tax trade, and there shall be made to or on the company, in respect of that trade, an allowance of such an amount, or, in respect of both the tonnage tax trade and the other trade, a balancing charge of such an amount, as may be just and reasonable, and
(c)paragraph 10(1)(b) and paragraph 10(2)(b) shall apply in relation to the part of the asset treated by virtue of this paragraph as in use wholly and exclusively for the purposes of the tonnage tax trade as they apply in relation to the machinery or plant referred to in paragraph 10(1)(a).
Plant and machinery: new expenditure partly for tonnage tax purposes
12.
(1)This paragraph shall apply where a company subject to tonnage tax incurs capital expenditure on the provision of machinery or plant partly for the purposes of its tonnage tax trade and partly for the purposes of another trade carried on by the company.
(2)Where this paragraph applies the machinery or plant shall be treated as 2 separate assets one in use wholly and exclusively for the purposes of the tonnage tax trade and the other in use wholly and exclusively for the purposes of the other trade of the company and, in determining the amount of any capital allowance, or the amount of any charge to be made, under Part 9 or under any provision which is to be construed as one with that Part in the case of that part of the asset treated as a separate asset for the purposes of the other trade of the company, regard shall be had to all relevant circumstances and, in particular, to the extent of the use of the machinery or plant for the purposes of the other trade, and there shall be made to or on the company, in respect of the other trade, an allowance of such an amount, or a charge of such an amount, as may be just and reasonable.
Plant and machinery: change of use of tonnage tax asset
13.
(1)This paragraph shall apply where, at a time when a company is subject to tonnage tax, machinery or plant acquired after the company became so subject and which is used wholly and exclusively for the purposes of the company’s tonnage tax trade begins to be used wholly or partly for purposes of another trade.
(2)Where this paragraph applies –
(a)if the asset begins to be used wholly for purposes of another trade the provisions of Part 9 shall apply as if capital expenditure had been incurred by the person carrying on the other trade on the provision of the plant or machinery for the purposes of that trade in that person’s chargeable period (within the meaning of Part 9) in which the plant or machinery is brought into use for those purposes, and the amount of that expenditure shall be taken as the lesser of –
(i)the amount of the capital expenditure actually incurred by the person, and
(ii)the price which the machinery or plant would have fetched if sold on the open market on the date on which it was so brought into use, and
(b)if the asset begins to be used partly for purposes of another trade of the company and partly for the purposes of the tonnage tax trade –
(i)the machinery or plant shall be treated as 2 separate assets one in use wholly and exclusively for the purposes of the tonnage tax trade and the other in use wholly and exclusively for the purposes of the other trade of the company,
(ii)Part 9 shall apply as if the company had incurred capital expenditure on the provision of that part of the asset treated as in use wholly and exclusively for the other trade of the company in the accounting period of the company in which that part of the asset is brought into use for those purposes, and
(iii)in determining the amount of any capital expenditure incurred on the provision of that part of the asset treated as in use as a separate asset for the purposes of the other trade of the company regard shall be had to all relevant circumstances as is just and reasonable.
Plant and machinery: change of use of non-tonnage tax asset
14.
(1)This paragraph shall apply where, at a time when a company is subject to tonnage tax, plant or machinery wholly and exclusively used for the purposes of another trade carried on by the company not being a tonnage tax trade begins to be used wholly or partly for the purposes of the company’s tonnage tax trade.
(2)Where this paragraph applies and the asset begins to be wholly used for the purposes of the company’s tonnage tax trade –
(a)no balancing allowance or balancing charge shall be made as a consequence of the change in use, and
(b)for the purposes of making a balancing charge under section 288 on the happening subsequent to the change in use of any of the events referred to in subsection (1) of that section –
(i)section 296 shall not apply as respects any accounting period of the company in which the asset is used wholly and exclusively for the purposes of the company’s tonnage tax trade,
(ii)where the event occurs at a time when the asset is so used, the amount of the capital expenditure of the company still unallowed at the time of the event shall, notwithstanding section 296, be the amount of the capital expenditure of the company on the provision of the machinery or plant which was still unallowed at the time the asset began to be so used, and
(iii)where the event occurs at a time when the asset is so used, the references in section 288 to sale, insurance, salvage or compensation moneys and the reference in section 289(3)(b) to the open-market value of the machinery or plant shall be taken to be references to the least of –
(I)the actual cost to the company of the machinery or plant for the purpose of the trade carried on by the company,
(II)the price the machinery or plant would have fetched if sold in the open market at the time the asset began to be so used, and
(III)the sale, insurance, salvage or compensation moneys (within the meaning of Part 9) arising on the event or, where paragraph (b) of section 289(3) applies, the open-market price of the machinery or plant (within the meaning of that section) at the time of the event.
(3)Where this paragraph applies and the asset begins to be partly used for the purposes of the company’s tonnage tax trade –
(a)the machinery or plant referred to in subparagraph (1) shall be treated as 2 separate assets one in use wholly and exclusively for the purposes of the other trade of the company and the other in use wholly and exclusively for the purposes of the tonnage tax trade of the company,
(b)no balancing charge or balancing allowance shall be made in respect of the part treated as in use wholly and exclusively for the purposes of the tonnage tax trade as a consequence of the change in use,
(c)subparagraph (2)(b) shall apply in relation to the part of the asset treated by virtue of this subparagraph as in use wholly and exclusively for the purposes of the tonnage tax trade as it applies in relation to the machinery or plant wholly used for the purposes of the company’s tonnage tax trade.
Plant and machinery: provisions relating to balancing charges
15.
(1)A balancing charge arising under Part 9 as applied by this Schedule or under this Schedule shall –
(a)be treated as arising in connection with a trade carried on by the company other than the company’s tonnage tax trade, and
(b)be made in taxing that trade.
(2)Subject to paragraph 16 or 17, the charge shall be given effect in the accounting period in which it arises.
(3)On the first occasion of the happening of an event which gives rise to a balancing charge (including such an event arising in respect of more than one asset on the same date) under Part 9 as applied by this Schedule, or under this Schedule, on a tonnage tax company, the tonnage tax company shall by notice in writing to the Revenue Commissioners elect for relief against that charge under either paragraph 16 or, if applicable, paragraph 17 but not for relief under both, and any such election shall be irrevocable and be included in the company’s return under Chapter 3 of Part 41A for the accounting period in which the charge arises.
(4)Where a balancing charge arises on a tonnage tax company under Part 9 as applied by this Schedule or under this Schedule subsequent to any charge on the company such as is referred to in subparagraph (3), relief against that charge shall only be available under the paragraph for which the company elected for relief in accordance with that subparagraph.
(5)Relief under paragraph 16 or 17 shall not be available to a company unless the company has made an election under subparagraph (3).
Reduction in balancing charge by reference to time in tonnage tax
16.The amount of any balancing charge under Part 9 as applied by this Schedule or under this Schedule shall be reduced by 20 per cent of the amount of the charge for each whole year in which the company on which the charge is to be made has been subject to tonnage tax calculated by reference to the time of the event giving rise to the charge.
Set-off of accrued losses against balancing charge
17.Where a balancing charge under Part 9 as applied by this Schedule or under this Schedule arises in connection with the disposal of a qualifying ship, then the company may set off against any balancing charge so arising any losses (including any losses referable to capital allowances treated by virtue of section 307 or 308 as trading expenses of the company) which accrued to the company before its entry to tonnage tax and which are attributable to –
(a)activities which under tonnage tax became part of the company’s tonnage tax trade, or
(b)a source of income which under tonnage tax becomes relevant shipping income.
Deferment of balancing charge on re-investment
18.
(1)Where –
(a)a balancing charge under Part 9 as applied by this Schedule arises in connection with the disposal of a qualifying ship, and
(b)within the period beginning on the date the company’s election for tonnage tax takes effect and ending 5 years after the date of the event giving rise to the balancing charge, the company or another qualifying company which is a member of the same tonnage tax group as the company incurs capital expenditure on the provision of one or more other qualifying ships (in this paragraph referred to as the ‘new asset’),
then
(i)if the amount on which the charge would have been made, as reduced under paragraph 16 or 17, if applicable, is greater than the capital expenditure on providing the new asset, the balancing charge shall be made only on an amount equal to the difference, and
(ii)if the capital expenditure on providing the new asset is equal to or greater than the amount on which the charge would have been made, as reduced under paragraph 16 or 17, if applicable, the balancing charge shall not be made.
(2)Where an event referred to in section 288(1) occurs in relation to the new asset in the period in which the company which incurs the expenditure on the new asset is subject to tonnage tax then a balancing charge shall be made under this paragraph on that company.
(3)Subject to any reduction under paragraph 16 or 17 and to any further application of this paragraph, the amount of the charge referred to in subparagraph (2) shall be –
(a)where subparagraph (1)(i) applies, the difference between the balancing charge which, but for subparagraph (1), would have been made on the disposal referred to in subparagraph (1) and the actual charge made,
(b)where subparagraph (1)(ii) applies, the amount of the charge which, but for subparagraph (1), would have been made on the disposal referred to in that subparagraph.
(4)Section 290 shall not apply in relation to balancing charges to which this paragraph applies.
(5)For the purposes of subparagraph (1), where machinery or plant is let to a tonnage tax company on the terms of that company being bound to maintain the machinery or plant and deliver it over in good condition at the end of the lease, and if the burden of the wear and tear on the machinery or plant will in fact fall directly on the company, then the capital expenditure on the provision of the machinery and plant shall be deemed to have been incurred by that company and the machinery and plant shall be deemed to belong to that company.
Exit: plant and machinery
19.
(1)Where a company leaves tonnage tax the amount of capital expenditure incurred on the provision of machinery or plant in respect of each asset used by the company for the purposes of its tonnage tax trade which asset was acquired at a time the company was subject to tonnage tax and held by the company at the time it leaves tonnage tax shall be deemed to be the lesser of –
(a)the capital expenditure actually incurred by the company on the provision of that machinery or plant for the purposes of the company’s tonnage tax trade, and
(b)the price the machinery or plant would have fetched if sold in the open market at the date the company leaves tonnage tax.
(2)For the purposes of the making of allowances and charges under Part 9 or any provision construed as one with that Part, the capital expenditure on the provision of the machinery or plant as determined in accordance with subparagraph (1) shall be deemed to have been incurred on the day immediately following the date the company leaves tonnage tax.
(3)
(a)This subparagraph applies where a company –
(i)leaves tonnage tax having incurred expenditure on the provision of machinery or plant for the purposes of a trade carried on by the company before entry into tonnage tax,
(ii)has used that machinery or plant for the purposes of its tonnage tax trade,
(iii)has been denied allowances in respect of that machinery or plant by virtue of section 697O and the provisions of paragraph 10(1)(b)(ii) or paragraph 11(2)(c), and
(iv)on leaving tonnage tax starts, recommences or continues to use that machinery or plant for the purposes of a trade carried on by it.
(b)Subject to clauses (c) and (d), where this subparagraph applies any allowance which, but for section 697O and paragraph 10(1)(b) or 11(2)(c), would have been made under Part 9 or any provision construed as one with that Part to the company for any accounting period in which it was subject to tonnage tax shall, subject to compliance with that Part, be made instead for such accounting periods immediately after the company leaves tonnage tax as will ensure, subject to that Part, that all such allowances are made to the company in those accounting periods as would have been made to the company in respect of that machinery or plant if the company had never been subject to tonnage tax.
(c)No wear and tear allowance shall be made by virtue of this subparagraph in respect of any machinery or plant for any accounting period of a company if such allowance when added to the allowances in respect of that machinery or plant made to that company for any previous accounting period will make the aggregate amount of the allowances exceed the actual cost to that company of the machinery or plant, including in that actual cost any expenditure in the nature of capital expenditure on the machinery or plant by means of renewal, improvement or reinstatement.
(d)A wear and tear allowance in respect of any machinery or plant made by virtue of this subparagraph for any accounting period shall not exceed the amount appropriate to that machinery or plant as set out in section 284(2).
Industrial buildings
20.
(1)Where any identifiable part of a building or structure is used for the purposes of a company’s tonnage tax trade, that part is treated for the purposes of Chapter 1 of Part 9 as used otherwise than as an industrial building or structure.
(2)
(a)This subparagraph applies where, in an accounting period during which a company is subject to tonnage tax, an event giving rise to a balancing charge occurs in relation to an industrial building or structure in respect of which capital expenditure was incurred by the company before its entry into tonnage tax.
(b)Where this subparagraph applies –
(i)the sale, insurance, salvage or compensation moneys to be brought into account in respect of any industrial building or structure shall be limited to the market value of the relevant interest when the company entered tonnage tax, and
(ii)the amount of any balancing charge under that Part shall, subject to subparagraphs (3) to (5) of paragraph 15, be reduced in accordance with paragraph 16 or 17, as appropriate.
(3)Where a company subject to tonnage tax disposes of the relevant interest in an industrial building or structure, section 277 shall apply to determine the residue of expenditure in the hands of the person who acquires the relevant interest, as if –
(a)the company had not been subject to tonnage tax, and
(b)all writing-down allowances, and balancing allowances and charges, had been made as could have been made if the company had not been subject to tonnage tax.
(4)Where a company leaves tonnage tax the amount of capital expenditure qualifying for relief under Chapter 1 of Part 9 shall be determined as if –
(a)the company had never been subject to tonnage tax, and
(b)all such allowances and charges under that Part had been made as could have been made.
Schedule 18B, Part 4 Groups, Mergers and Related Matters (paras. 21-30)
Company not to be treated as member of more than one group
21.
(1)Where a company is a member of both a tonnage tax group and a non-tonnage tax group which if a group election had been made would have been a tonnage tax group (in this paragraph referred to as a qualifying non-tonnage tax group), the company shall be treated as a member of the tonnage tax group and not of the qualifying non-tonnage tax group.
(2)Where a company is a member of 2 tonnage tax groups, the company shall be treated as a member of the group whose tonnage tax election was made first and not of the other tonnage tax group. In the case of group elections made at the same time, the company shall choose which election it joins in and for the purposes of Part 24A and this Schedule the company shall be treated as a member of the group in respect of which that election is made and not of any other tonnage tax group.
Arrangements for dealing with group matters
22.
(1)The Revenue Commissioners may enter into arrangements with the qualifying companies in a group for one of those companies to deal on behalf of the group in relation to matters arising under Part 24A and this Schedule that may conveniently be dealt with on a group basis.
(2)Any such arrangements –
(a)may make provision in relation to cases where companies become or cease to be members of a group;
(b)may make provision for or in connection with the termination of the arrangements; and
(c)may make such supplementary, incidental, consequential or transitional provision as is necessary or expedient for the purposes of the arrangements.
(3)Any such arrangements shall not affect –
(a)any requirement under Part 24A and this Schedule that an election be made jointly by all the qualifying companies in the group; or
(b)any liability under Part 24A, this Schedule or any other provision of the Tax Acts of a company to which the arrangements relate.
Meaning of ‘merger’ and ‘demerger’
23.
(1)In this Schedule –
“merger” means a transaction by which one or more companies become members of a group;
“demerger” means a transaction by which one or more companies cease to be members of a group.
(2)References to a merger to which a group is a party include any merger affecting a member of the group.
Merger: between tonnage tax groups or companies
24.
(1)This paragraph shall apply where there is a merger –
(a)between 2 or more tonnage tax groups,
(b)between one or more tonnage tax groups and one or more tonnage tax companies, or
(c)between two or more tonnage tax companies.
(2)Where this paragraph applies the group resulting from the merger is a tonnage tax group as if a group election had been made.
(3)The deemed election referred to in subparagraph (2) continues in force, subject to the provisions of this Part, until whichever of the existing tonnage tax elections had the longest period left to run would have expired.
Merger: tonnage tax group/ company and qualifying non-tonnage tax group/company
25.
(1)This paragraph shall apply where there is a merger between a tonnage tax group or company and a qualifying non-tonnage tax group or company.
(2)Where this paragraph applies the group resulting from the merger may elect that –
(a)it be treated as if a group election had been made which deemed election shall continue in force until the original election made by the tonnage tax group or company would have expired, or
(b)the tonnage tax election of the group or company ceases to be in force as from the date of the merger.
(3)Any election under subparagraph (2) shall be made jointly by all the qualifying companies in the group resulting from the merger and by way of notice in writing to the Revenue Commissioners within 12 months of the merger.
Merger: tonnage tax group or company and non-qualifying group or company
26.
(1)This paragraph shall apply where there is a merger between a tonnage tax group or company and a non-qualifying group or company.
(2)Where this subsection applies the group resulting from the merger is a tonnage tax group by virtue of the election of the tonnage tax group or company.
Merger: non-qualifying group or company and qualifying non-tonnage tax group or company
27.
(1)This paragraph shall apply where there is a merger between a non-qualifying group or company and a qualifying non-tonnage tax group or company.
(2)Where this paragraph applies, the group resulting from the merger may make a tonnage tax election having effect as from the date of the merger.
(3)Any such election shall be made jointly by all the qualifying companies in the group resulting from the merger, by notice in writing to the Revenue Commissioners, within 12 months of the merger.
Demerger: single company
28.
(1)This paragraph shall apply where a tonnage tax company ceases to be a member of a tonnage tax group and does not become a member of another group.
(2)Where this paragraph applies –
(a)the company in question remains a tonnage tax company as if a single company election had been made, and
(b)that deemed election continues in force, subject to the provisions of this Schedule, until the group election would have expired.
(3)If 2 or more members of the previous group remain, and any of them is a qualifying company, the group consisting of those companies shall be a tonnage tax group by virtue of the previous group election.
Demerger: group
29.
(1)This paragraph shall apply where a tonnage tax group splits into two or more groups.
(2)Where this paragraph applies each new group that contains a qualifying company that was a tonnage tax company before the demerger shall be a tonnage tax group as if a group election had been made.
(3)That deemed election continues in force, subject to the provisions of this Schedule, until the group election would have expired.
Duty to notify Revenue Commissioners of group changes
30.
(1)A tonnage tax company that becomes or ceases to be a member of a group, or of a particular group, shall give notice in writing to the Revenue Commissioners of that fact.
(2)The notice shall be given within the period of 12 months beginning with the date on which the company became or ceased to be a member of the group.
Schedule 18B, Part 5 Miscellaneous and supplemental (paras. 31-34)
Measurement of tonnage of ship
31.
(1)References in Part 24A and in this Schedule to the gross or net tonnage of a ship are to that tonnage as determined –
(a)in the case of a vessel of 24 metres in length or over, in accordance with the IMO International Convention on Tonnage Measurement of Ships 1969;
(b)in the case of a vessel under 24 metres in length, in accordance with tonnage regulations.
(2)A ship shall not be treated as a qualifying ship for the purposes of this Part and this Schedule unless there is in force –
(a)a valid International Tonnage Certificate (1969), or
(b)a valid certificate recording its tonnage as measured in accordance with tonnage regulations.
(3)In this paragraph ‘tonnage regulations’ means regulations under section 91 of the Mercantile Marine Act, 1955 or the provisions of the law of a country or territory outside the State corresponding to those regulations.
Second or subsequent application of sections 697P and 697Q
32.Where sections 697P and 697Q apply on a second or subsequent occasion on which a company ceases to be a tonnage tax company (whether or not those sections applied on any of the previous occasions) –
(a)the references to the company ceasing to be a tonnage tax company shall be read as references to the last occasion on which it did so, and
(b)the references to the period during which the company was a tonnage tax company do not include any period before its most recent entry into tonnage tax.
Appeals
33.[deleted]
Delegation of powers and functions
34.The Revenue Commissioners may nominate any of their officers to perform any acts and discharge any functions authorised by Part 24A or this Schedule to be performed or discharged by the Revenue Commissioners.