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75% limit on chartering in to partner

As explained in TTM05001 onwards, there is a 75% limit on the proportion of a tonnage tax group’s fleet that may be chartered in other than on bareboat terms, usually meaning on time or voyage charter.

A company that operates ships through a corporate partnership only shares in the operation of those ships. To reflect that fact, there is a relaxation of the 75% limit on chartering in where ships are operated through a corporate partnership.

SI00/2303/REG11 sets out a series of steps to follow in applying the 75% charter in limit to a company or group in cases where some of its qualifying activities are carried on through a corporate partnership:

• Step one: What is the aggregate net tonnage operated by the partnership during the accounting period in question?
• Step two: To what extent is this ‘chartered inâ€� (excluding charters in from other partners or fellow members of the tonnage tax company’s group)?

This step establishes that the partnership operates x tons, of which y% is chartered in.

• Step three: Allocate a share of this result to the tonnage tax company in line with its share in partnership property.
• Step four: Repeat Steps One to Three for any other partnerships of which the tonnage tax company is a member and amalgamate the results.
• Step five: Amalgamate the result of Step Four with the results of the 75% charter in calculation for any ships operated by the company other than in partnership.
• Step six: Apply the 75% charter in limit to the result of Step Five.

Steps One to Six are repeated for each company in the group that has interests in corporate partnerships.

For an example of how to apply these Steps in practice see TTM13150.

References

SI00/2303/REG11 (ships chartered in to partners) TTM18011