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TTM11420 | Offshore activities: Allowance for training costs

From HM Revenue & Customs · Tonnage Tax Manual

Example calculation

The example below uses the relevant rate at the time of the payment in lieu of training. For the current and historical rates see TTM11410.

The tonnage tax group’s training commitment for the year ended 30 September 2013 shows that it has a total of 78 officers, and is required to train 5 trainee officers. It actually has 3 trainees in this year and makes a payment of £28,224 (2 x £14,112) in lieu of training (PILOT) for the balance of its training obligation.

Most companies in the group operate their ships within the normal tonnage tax regime, but one group company, company X, has three ships, A, B, and C, which engage in offshore activities during the year, and one other ship, D, which operates wholly within tonnage tax.

  • A has 3 officers, and spends the whole year engaged in offshore activities

  • B has 4 officers and spends 90 days engaged in offshore activities

  • C has 5 officers and spends 180 days engaged in offshore activities

The computation shows (in £):

Offshore profits from ships A, B & C 17/10/1917

Tonnage tax profits of ships B, C & D 2,150 (ship A is wholly ‘offshore’)

Rent from letting 1500

Total CT Profit 10,150 @ say 20% = 2,030.00 tax payable

An acceptable computation of the special allowance would be:

Step 1

The cash equivalent of the group training obligation is 5 x 14,112 = 70,560

Step 2

The cash equivalents of the training obligations for ships A, B, and C are

  • A: 70,560 x 3/78 = 2,714

  • B: 70,560 x 4/78 = 3,618

  • C: 70,560 x 5/78 = 4,523

Step 3

The allowance in respect of each ship is:

  • A: 2,714 x 365/365 = 2,714

  • B: 3,618 x 90/365 = 892

  • C: 4,523 x 180/365 = 2,231

The total allowance available to be set of against the company’s profits from the ships engaged in offshore activities is therefore 2,714 + 892 + 2,231 = 5,837.

Step 4

Allocate the allowance to the corporation tax on offshore profits:

CT on offshore profits 6,500 @ 20% 1,300.00

Less training allowance 1,300.00

Net CT on offshore profits Nil

CT on other profits £3,650 @ 20% 730.00

Total CT to pay 730.00

Training Allowance c/fwd 5,837 less 1,300 = 4,537

References

Overview of training requirement for offshore activities TTM11400

Procedure for computing training costs allowance TTM11410