SolvedTTM13120 | Partnerships: Operation of ships
From HM Revenue & Customs · Tonnage Tax Manual
Bareboat charter out
Bareboat charter out to partnership
A tonnage tax company is not normally treated as operating a ship that is bareboat chartered out, see TTM03150. One of the exceptions to the rule that the bareboat charter out of a ship does not count as ‘operation’ is where the person to whom it is chartered is not a third party, see TTM03160.
If a member of a corporate partnership bareboat charters a ship to the partnership for use in its tonnage tax activities, the bareboat charter is not treated as a charter to a third party, and so the company will still be treated as operating that ship.
See TTM13110 about avoiding double counting of that ship in computing tonnage tax profits of the ship owner that has chartered out the ship.
Bareboat charter out to partner
Where a corporate partner (partner ’A’) charters out a ship to another member of the same partnership (partner ‘B’), then A will not normally be treated as operating that ship, unless A and B are members of the same tonnage tax group.
However, A will be treated as operating the ship if it is used by the partnership. The rules preventing double counting, TTM13110, will apply when computing the tonnage tax profits of both A and B.