TTM06500 | Relevant shipping profits: Exclusion of investment income

Making investments is not a tonnage tax activity.

In particular:

• income from investments is not relevant shipping income, and

• to the extent that an activity gives rise to ‘income from investments’, see below, it is not regarded as part of a company's tonnage tax activities.

Exceptions

The only exceptions to this general rule are:

• dividends from overseas shipping companies, if certain conditions are satisfied, see TTM06400 and FA00/SCH22/PARA49, and

• interest and similar income which would, however, fall to be treated as trading income under the normal Corporation Tax rules, see TTM06510 and PARA50.

‘Income from investments’

For this purpose ‘income from investments’ is defined at FA00/SCH22/PARA51 (3) and includes, in the main:

• property income (CTA09/PART4),

• loan relationships non-trading profits (CTA09/S299), and

• annual payments not otherwise charged (CTA09/PART10/CHAPTER7).

The exceptions mentioned above are not affected.

Intra-group loans (inter-company loans)

It follows from the above that interest on an intra-group loan will not generally not be relevant shipping income. Interest on such loans will therefore be assessable outside the ring fence.

Furthermore, if an intra-group loan is made to a tonnage tax company in circumstances such that the interest payable would fall to be allowed as a deduction in computing the relevant shipping profits of the borrower, the transfer pricing rules (as described in TTM07400) will apply. But see TTM07500 on interaction of transfer pricing and finance costs.