TTM02303 | Tonnage tax elections: Example 3

Group companies with differing accounting periods

D Ltd has three subsidiaries, E Ltd, F Ltd and G Ltd. They have varying annual accounting dates as follows:

D Ltd: 31 December

E Ltd: 31 March

F Ltd: 30 June

G Ltd: 30 September

The group makes a tonnage tax election on 1 April 2006, notifying that it wishes the election to have effect from the earliest possible date for each company.

The group election is made on 1 April 2006. The beginning of the accounting period then running for each of the companies in the group is as follows:

• D Ltd: 1 January 2006

• E Ltd: 1 April 2006

• F Ltd: 1 July 2005

• G Ltd: 1 October 2005

With HMRC’s agreement, the election can have effect for D Ltd and E Ltd from the start of the accounting period before that during which the election is made, that is, from the following dates:

• D Ltd: 1 January 2005

• E Ltd: 1 April 2005

But there is no scope for F Ltd and G Ltd to backdate their entry to the regime to before the period dictated by the normal rule, as they do not have an earlier accounting period starting on or after 1 January 2005.

The election runs for 10 years from the time that the election first had effect for any company. In this case, the election first has effect (for D Ltd) on 1 January 2005, so will expire on 31 December 2014. Note that the election period was by FA22 reduced from 10 years to 8 for elections made on or after 1 April 2022.