TTM03900 | Qualifying companies and ships: Flagging - introduction

FA00/SCH22/PARA22A to FA00/SCH22/PARA22F

These EU/EEA 'flagging' rules were repealed by FA22/S25 (6) and (7) with effect from 1 April 2022

The term ‘flagging’ is commonly used to refer to where a vessel is registered.

One of the intentions behind subsidies or 'state aids' for the maritime sector, such as tonnage tax, was, in the eyes of the EU Commission, to encourage ship operators to register their vessels on the register of an EU/EEA Member State.

For vessels other than tugs and dredgers, whether the flagging rules apply depended on whether the overall proportion vessels registered on the registers of member states, if it fell short of 60%, was increasing.

Where, in a particular financial year, the proportion of ships in tonnage tax as a whole that were flagged in a member state was stable or increasing, then the Treasury might, by order, make that year an 'excepted year' so that companies and groups did not need to consider flagging on a company or group basis.

In other years, when a company started to operate a vessel then they had to consider where it is registered in order to determine whether or not it was a qualifying ship for tonnage tax purposes.

Qualifying tugs and dredgers had also to be flagged on the register of a Member State.

The legislation was amended by SI2020/332 to maintain its effect temporarily following departure from the EU/EEA, but was repealed by FA22 with efect from 1 April 2022..