Finance Bill - continued        House of Lords

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SCHEDULE 22
 
  TONNAGE TAX
  PART I
  INTRODUCTORY
 
Tonnage tax
     1. - (1) This Schedule provides an alternative regime ("tonnage tax") for calculating the profits of a shipping company for the purposes of corporation tax.
 
      (2) The regime applies only if an election to that effect (a "tonnage tax election") is made (see Part II of this Schedule).
 
  Companies that are members of a group must join in a group election.
 
      (3) A tonnage tax election may only be made if-
 
 
    (a) the company or group is a qualifying company or group (see Part III of this Schedule), and
 
    (b) certain requirements are met as to training (see Part IV of this Schedule) and other matters (see Part V of this Schedule).
 
Tonnage tax companies and groups
     2. - (1) In this Schedule a "tonnage tax company" or "tonnage tax group" means a company or group in relation to which a tonnage tax election has effect.
 
      (2) References in this Schedule to a company entering or leaving tonnage tax are to its becoming or ceasing to be a tonnage tax company.
 
  References to a company being subject to tonnage tax have a corresponding meaning.
 
 
Profits of tonnage tax company
     3. - (1) In the case of a tonnage tax company, its tonnage tax profits are brought into charge to corporation tax in place of its relevant shipping profits (see Part VI of this Schedule).
 
      (2) Where profits would be relevant shipping income, any loss accruing to the company is similarly left out of account for the purposes of corporation tax.
 
 
Tonnage tax profits: method of calculation
     4. - (1) A company's tonnage tax profits for an accounting period are calculated in accordance with this paragraph by reference to the net tonnage of the qualifying ships operated by the company.
 
  For the purposes of the calculation the net tonnage of a ship is rounded down (if necessary) to the nearest multiple of 100 tons.
 
      (2) The calculation is as follows:
 
Step One      Determine the daily profit for each qualifying ship operated by the company by reference to the following table and the net tonnage of the ship:
 
 
 
For each 100 tons up to 1,000 tons
 
£0.60
 
For each 100 tons between 1,000 and 10,000 tons
 
£0.45
 
For each 100 tons between 10,000 and 25,000 tons
 
£0.30
 
For each 100 tons above 25,000 tons
 
£0.15
Step Two      Work out the ship's profit for the accounting period by multiplying the daily profit by-
 
 
    (a) the number of days in the accounting period, or
 
    (b) if the ship was operated by the company as a qualifying ship for only part of the period, by the number of days in that part.
Step Three      Follow Steps One and Two for each of the qualifying ships operated by the company in the accounting period.
 
Step Four      Add together the resulting amounts and the total is the amount of the company's tonnage tax profits for that accounting period.
 
 
Tonnage tax profits: calculation in case of joint operation etc.
     5. - (1) If two or more companies fall to be regarded as operators of a ship by virtue of a joint interest in the ship, or in an agreement for the use of the ship, the tonnage tax profits of each are calculated as if each were entitled to a share of the profits proportionate to its share of that interest.
 
      (2) If two or more companies fall to be treated as the operator of a ship otherwise than as mentioned in sub-paragraph (1), the tonnage tax profits of each are computed as if each were the only operator.
 
 
Measurement of tonnage of ship
     6. - (1) References in this Schedule to the gross or net tonnage of a ship are to that tonnage as determined-
 
 
    (a) in the case of a vessel of 24 metres in length or over, in accordance with the IMO International Convention on Tonnage Measurement of Ships (ITC69);
 
    (b) in the case of a vessel under 24 metres in length, in accordance with tonnage regulations.
      (2) A ship shall not be treated as a qualifying ship for the purposes of this Schedule unless there is in force-
 
 
    (a) a valid International Tonnage Certificate (1969), or
 
    (b) a valid certificate recording its tonnage as measured in accordance with tonnage regulations.
      (3) In this paragraph "tonnage regulations" means regulations under section 19 of the Merchant Shipping Act 1995 or provisions of the law of a country or territory outside the United Kingdom corresponding to those regulations.
 
  PART II
  TONNAGE TAX ELECTIONS
 
Company or group election
     7. - (1) A tonnage tax election may be made in respect of-
 
 
    (a) a qualifying single company (a "company election"), or
 
    (b) a qualifying group (a "group election").
      (2) A group election has effect in relation to all qualifying companies in the group.
 
 
Method of making election
     8. - (1) A tonnage tax election is made by notice to the Inland Revenue.
 
      (2) The notice must contain such particulars and be supported by such evidence as the Inland Revenue may require.
 
 
Person by whom election to be made
     9. - (1) A company election must be made by the company concerned.
 
      (2) A group election must be made jointly by all the qualifying companies in the group.
 
 
When election may be made
     10. - (1) A tonnage tax election may be made at any time before the end of the period of twelve months beginning with the day on which this Act is passed ("the initial period").
 
  After the end of the initial period a tonnage tax election may only be made-
 
 
    (a) in the circumstances specified in the following provisions of this paragraph, or
 
    (b) as provided by an order under paragraph 11 (power to provide further opportunities for election).
      (2) An election may be made after the end of the initial period in respect of a single company that-
 
 
    (a) becomes a qualifying company, and
 
    (b) has not previously been a qualifying company at any time after the passing of this Act.
  Any such election must be made before the end of the period of twelve months beginning with the day on which the company became a qualifying company.
 
      (3) An election may be made after the end of the initial period in respect of a group that becomes a qualifying group by virtue of a member of the group becoming a qualifying company, not previously having been a qualifying company at any time after the passing of this Act.
 
  This does not apply if the group-
 
 
    (a) was previously a qualifying group at any time after the passing of this Act, or
 
    (b) is substantially the same as a group that was previously a qualifying group at any such time.
  An election under this sub-paragraph must be made before the end of the period of twelve months beginning with the day on which the group became a qualifying group.
 
      (4) This paragraph does not prevent an election being made under the provisions of Part XII of this Schedule relating to mergers and demergers.
 
 
Power to provide further opportunities for election
     11. - (1) The Treasury may by order provide for further periods during which tonnage tax elections may be made.
 
      (2) Any such order may provide for this Part of this Schedule to apply, with such consequential adaptations as appear to the Treasury to be appropriate, in relation to any such further period as it applies in relation to the initial period.
 
  The consequential adaptations that may be made include adaptations of the references to the passing of this Act or to 1st January 2000.
 
 
When election takes effect
     12. - (1) The general rule is that a tonnage tax election has effect from the beginning of the accounting period in which it is made.
 
  This is subject to the following exceptions.
 
      (2) A tonnage tax election cannot have effect in relation to an accounting period beginning before 1st January 2000.
 
  If the general rule would produce that effect, the election has effect instead from the beginning of the accounting period following that in which it is made.
 
      (3) The Inland Revenue may agree that a tonnage tax election made before the end of the initial period shall have effect from the beginning of an accounting period earlier than that in which it is made (but not one beginning before 1st January 2000).
 
      (4) The Inland Revenue may agree that a tonnage tax election made before the end of the initial period shall have effect from the beginning of the accounting period following that in which it is made.
 
  In exceptional circumstances they may agree that it shall have effect from the beginning of the accounting period following that one.
 
      (5) In the case of a group election in respect of a group where the members have different accounting periods-
 
 
    (a) sub-paragraph (1), or
 
    (b) any agreement under sub-paragraph (3) or (4),
       has effect in relation to each qualifying company by reference to that company's accounting periods.
 
      (6) A tonnage tax election under paragraph 10(2) or (3) (election in consequence of company becoming a qualifying company) has effect from the time at which the company in question became a qualifying company.
 
  This is subject to paragraph 38(2)(a) and (b) (effect in certain cases of exceeding the 75% limit on chartered in tonnage).
 
 
Period for which election is in force
     13. - (1) The general rule is that a tonnage tax election remains in force until it expires at the end of the period of ten years beginning-
 
 
    (a) in the case of a company election, with the first day on which the election has effect in relation to the company;
 
    (b) in the case of a group election, with the first day on which the election has effect in relation to any member of the group.
  This is subject to the following exceptions.
 
      (2) A tonnage tax election ceases to be in force-
 
 
    (a) in the case of a company election, if the company ceases to be a qualifying company;
 
    (b) in the case of a group election, if the group ceases to be a qualifying group.
      (3) A tonnage tax election may also cease to be in force under-
 
 
    (a) the provisions of Part V of this Schedule, or
 
    (b) the provisions of Part XII of this Schedule relating to mergers and demergers.
      (4) This paragraph has effect subject to paragraph 15(4) (election superseded by renewal election).
 
 
Effect of election ceasing to be in force
     14. A tonnage tax election that ceases to be in force ceases to have effect in relation to any company.
 
 
Renewal election
     15. - (1) At any time when a tonnage tax election is in force in respect of a single company or group a further tonnage tax election (a "renewal election") may be made in respect of that company or group.
 
      (2) This is subject to paragraph 32(5) (training requirement: no renewal election if non-compliance notice in force).
 
      (3) The provisions of-
 
 
    paragraphs 7 to 9 (type of election, method of election and person by whom election to be made), and
 
    paragraphs 13 and 14 (period for which election is in force and when election ceases to have effect),
       apply in relation to a renewal election as they apply in relation to an original tonnage tax election.
 
      (4) A renewal election supersedes the existing tonnage tax election.
 
  PART III
  QUALIFYING COMPANIES AND GROUPS
 
Qualifying companies and groups
     16. - (1) For the purposes of this Schedule a company is a "qualifying company" if-
 
 
    (a) it is within the charge to corporation tax,
 
    (b) it operates qualifying ships, and
 
    (c) those ships are strategically and commercially managed in the United Kingdom.
      (2) A "qualifying group" means a group of which one or more members are qualifying companies.
 
 
Effect of temporarily ceasing to operate qualifying ships
     17. - (1) This paragraph applies where a company temporarily ceases to operate any qualifying ships.
 
  It does not apply where a company continues to operate a ship that temporarily ceases to be a qualifying ship.
 
      (2) If the company gives notice to the Inland Revenue stating-
 
 
    (a) its intention to resume operating qualifying ships, and
 
    (b) its wish to remain within tonnage tax,
       the company shall be treated for the purposes of this Schedule as if it had continued to operate the qualifying ship or ships it operated immediately before the temporary cessation.
 
      (3) The notice must be given not later than the date which is the filing date for the company's company tax return for the accounting period in which the temporary cessation begins.
 
  "Filing date" and "company tax return" here have the same meaning as in Schedule 18 to the Finance Act 1998.
 
      (4) This paragraph ceases to apply if and when the company-
 
 
    (a) abandons its intention to resume operating qualifying ships, or
 
    (b) again in fact operates a qualifying ship.
 
Meaning of operating a ship
     18. - (1) A company is regarded for the purposes of this Schedule as operating any ship owned by, or chartered to, the company, subject to the following provisions.
 
      (2) A company is not regarded as the operator of a ship where part only of the ship has been chartered to it.
 
  For this purpose a company is not to be taken as having part only of a ship chartered to it by reason only of the ship being chartered to it jointly with one or more other persons.
 
      (3) A company is not regarded as the operator of a ship that has been chartered out by it on bareboat charter terms, except as provided by the following provisions.
 
      (4) A company is regarded as operating a ship that has been chartered out by it on bareboat charter terms if the person to whom it is chartered is not a third party.
 
  For this purpose a "third party" means-
 
 
    (a) in the case of a single company, any other person;
 
    (b) in the case of a member of a group-
 
      (i) any member of the group that is not a tonnage tax company (and does not become a tonnage tax company by virtue of the ship being chartered to it), or
 
      (ii) any person who is not a member of the group.
      (5) A company is not regarded as ceasing to operate a ship that has been chartered out by it on bareboat charter terms if-
 
 
    (a) the ship is chartered out because of short-term over-capacity, and
 
    (b) the term of the charter does not exceed three years.
      (6) A company is regarded as operating a ship that has been chartered out by it on bareboat charter terms if the ship-
 
 
    (a) is registered in the United Kingdom, and
 
    (b) is in the service of a government department by reason of a charter by demise to the Crown,
       and there is in force under section 308(2) of the Merchant Shipping Act 1995 an Order in Council providing for the registration of government ships in the service of that department.
 
  In this sub-paragraph "government department" includes a Northern Ireland department.
 
 
Qualifying ships
     19. - (1) For the purposes of this Schedule a "qualifying ship" means, subject to sub-paragraph (2), a seagoing ship of 100 tons or more gross tonnage used for-
 
 
    (a) the carriage of passengers,
 
    (b) the carriage of cargo,
 
    (c) towage, salvage or other marine assistance, or
 
    (d) transport in connection with other services of a kind necessarily provided at sea.
      (2) A vessel is not a qualifying ship for the purposes of this Schedule if the main purpose for which it is used is the provision of goods or services of a kind normally provided on land.
 
      (3) Sub-paragraph (1) is also subject to paragraph 20 (vessels excluded from being qualifying ships).
 
      (4) For the purposes of this paragraph a ship is a seagoing ship if it is certificated for navigation at sea by the competent authority of any country or territory.
 
 
Vessels excluded from being qualifying ships
     20. - (1) The following kinds of vessel are not qualifying ships for the purposes of this Schedule-
 
 
    (a) fishing vessels or factory ships;
 
    (b) pleasure craft;
 
    (c) harbour or river ferries;
 
    (d) offshore installations;
 
    (e) tankers dedicated to a particular oil field;
 
    (f) dredgers.
      (2) In sub-paragraph (1)(a) "factory ship" means a vessel providing processing services for the fishing industry.
 
      (3) In sub-paragraph (1)(b) "pleasure craft" means a vessel of a kind whose primary use is for the purposes of sport or recreation.
 
      (4) In sub-paragraph (1)(c) "harbour or river ferry" means a vessel used for harbour, estuary or river crossings.
 
      (5) In sub-paragraph (1)(d) "offshore installation" means-
 
 
    (a) an offshore installation within the meaning of the Mineral Workings (Offshore Installations) Act 1971, or
 
    (b) what would be such an installation if the references in that Act to controlled waters were to any waters.
      (6) For the purposes of sub-paragraph (1)(e) whether a tanker is dedicated to a particular oil field shall be determined in accordance with section 2 of the Oil Taxation Act 1983 (dedicated mobile assets).
 
 
Power to modify exclusions
     21. The Treasury may make provision by order amending paragraph 20 so as to add any description of vessel to, or remove any description of vessel from, the kinds of vessel that are excluded from being qualifying ships for the purposes of this Schedule.
 
 
Effect of change of use
     22. - (1) A qualifying ship that begins to be used as a vessel of an excluded kind ceases to be a qualifying ship when it begins to be so used, subject to the following provisions.
 
      (2) If-
 
 
    (a) a company operates a ship throughout an accounting period of the company, and
 
    (b) in that period the ship is used as a vessel of an excluded kind on not more than 30 days,
       that use shall be disregarded in determining whether the ship is a qualifying ship at any time during that period.
 
      (3) In the case of an accounting period shorter than a year, the figure of 30 days in sub-paragraph (2) shall be proportionately reduced.
 
      (4) If a company operates a ship during part only of an accounting period of the company, sub-paragraph (2) has effect as if for "30 days", or the number of days substituted by sub-paragraph (3), there were substituted the number of days that bear to the length of that part of the accounting period the same proportion that 30 days does to a year.
 
      (5) In this paragraph references to use as a vessel of an excluded kind are to use as a vessel of a kind excluded by paragraph 20 from being a qualifying ship.
 
  PART IV
  THE TRAINING REQUIREMENT
 
Introduction
     23. - (1) It is a condition of entering tonnage tax or making a renewal election that-
 
 
    (a) in the case of a single company, the company, or
 
    (b) in the case of a group, the group,
       meets certain minimum obligations in connection with the training of seafarers.
 
      (2) The provisions of this Part of this Schedule have effect for securing that result.
 
 
The minimum training obligation
     24. - (1) The Secretary of State may make provision by regulations as to the minimum obligation of a tonnage tax company as regards the training of seafarers.
 
      (2) The regulations may-
 
 
    (a) require the company to provide training for a minimum number of seafarers calculated on such basis as may be prescribed, and
 
    (b) impose different requirements with respect to the training of officers and ratings.
  Paragraph (b) is without prejudice to the general power to make different provision for different cases (see paragraph 36(2)(a)).
 
      (3) The regulations may impose such requirements as to the nationality and ordinary residence of trainees as appear to the Secretary of State to be appropriate.
 
      (4) References in this Part of this Schedule to "the minimum training obligation" are-
 
 
    (a) in relation to a single company, to the minimum obligation of that company, and
 
    (b) in relation to a group, to the minimum obligations of the qualifying companies in the group taken as a whole.
 
Meaning of "training commitment"
     25. - (1) References in this Part of this Schedule to a "training commitment" are to a statement by a company or group setting out how it proposes to meet the minimum training obligation.
 
      (2) A training commitment is not effective for the purposes of this Part of this Schedule unless approved by the Secretary of State.
 
      (3) Sub-paragraphs (1) and (2) are subject to-
 
 
    paragraph 27(4) and (5) (power of Secretary of State to set training commitment), and
 
    paragraph 28(2) (power of Secretary of State to adjust training commitment to take account of changed circumstances).
 
Approval of initial training commitment
     26. - (1) A company or group proposing to make a tonnage tax election must produce, and submit to the Secretary of State for approval, an initial training commitment.
 
      (2) If the Secretary of State is satisfied that the proposals are adequate to meet the minimum training obligation, he shall approve the initial training commitment and issue a certificate to that effect.
 
      (3) A tonnage tax election is ineffective unless such a certificate of approval is in force with respect to the training commitment of the company or group in respect of which the election is made.
 
 
Annual training commitment
     27. - (1) The Secretary of State may by regulations require a tonnage tax company or tonnage tax group-
 
 
    (a) to produce a training commitment at such annual or other intervals as may be prescribed in respect of such period as may be prescribed, and
 
    (b) to submit it to the Secretary of State for approval.
      (2) If the Secretary of State is satisfied that the proposals are adequate to meet the minimum training obligation, he shall approve the training commitment and issue a certificate to that effect.
 
      (3) It is an offence to fail to comply with any requirement imposed by regulations under sub-paragraph (1).
 
      (4) The Secretary of State may make provision by regulations enabling him-
 
 
    (a) to set the training commitment for a company or group if, after such period as may be prescribed, no training commitment has been submitted to and approved by him; and
 
    (b) on the application of the company or group concerned, made after consultation with any prescribed person involved in the training of seafarers, to vary a training commitment set by him.
      (5) A training commitment set by the Secretary of State has effect as if submitted by the company or group and approved by him.
 
 
Supplementary provisions about training commitments
     28. - (1) The Secretary of State may make provision by regulations-
 
 
    (a) as to the form and contents of a training commitment;
 
    (b) requiring an application for approval of a training commitment to be in such form and contain such information as may be prescribed;
 
    (c) authorising the Secretary of State, when considering a training commitment, to consult any prescribed person involved in the training of seafarers;
 
    (d) as to the procedure to be followed where the Secretary of State is minded not to approve a training commitment.
      (2) The Secretary of State may make provision by regulations-
 
 
    (a) enabling him, on the application of the company or group concerned, to adjust a training commitment (to any extent) to take account of changed circumstances;
 
    (b) requiring an application for adjustment to be in such form and contain such information as may be prescribed;
 
    (c) authorising the Secretary of State, when considering an application for adjustment, to consult any prescribed person involved in the training of seafarers;
 
    (d) as to the procedure to be followed where the Secretary of State is minded not to make the adjustment applied for.
      (3) The Secretary of State may by regulations make such provision as he thinks appropriate as to the effect in relation to a training commitment of a merger or other transaction resulting in a change of control of one or more companies.
 
 
Payments in lieu of training
     29. - (1) The Secretary of State may make provision by regulations-
 
 
    (a) allowing a company or group, in such circumstances and to such extent as may be prescribed, to propose in its training commitment to meet the minimum training obligation by making payments in lieu of training; and
 
    (b) requiring a company or group to make payments in lieu of training-
 
      (i) where its training commitment provides for such payments;
 
      (ii) where training is not provided in accordance with its training commitment.
      (2) The regulations shall provide for payments in lieu of training-
 
 
    (a) to be calculated on such basis as may be prescribed,
 
    (b) to be made to or for the benefit of any prescribed person involved in the training of seafarers, and
 
    (c) to be made at such intervals and in such manner as may be prescribed.
      (3) The regulations may provide that if in any case there is a failure in relation to a company or group to comply with the requirements of this Part of this Schedule with respect to-
 
 
    (a) the submission of training commitments, or
 
    (b) the making of returns or provision of information,
       the Secretary of State may determine to the best of his information and belief the amount of the payments in lieu of training to be made by the company or group.
 
      (4) The regulations may provide that a payment in lieu of training that has become due but is unpaid-
 
 
    (a) is a debt due to the Secretary of State or any prescribed person involved in the training of seafarers, and
 
    (b) carries interest at such rate as may be prescribed.
      (5) The regulations may provide for the costs or expenses of any legal or other proceedings for recovering the debt or interest to be recoverable, and to carry interest, in the same way as the debt.
 
 
Monitoring of compliance with training commitment
     30. - (1) The Secretary of State may make provision by regulations-
 
 
    (a) requiring a return to be made to the Secretary of State or any prescribed person involved in the training of seafarers, at such intervals as may be prescribed, of such information as may be prescribed relating to-
 
      (i) the training provided, and
 
      (ii) any payments in lieu of training made,
 
    by a tonnage tax company or tonnage tax group;
 
    (b) authorising the Secretary of State to direct any person to provide such information as the Secretary of State may reasonably require for the purposes of ascertaining-
 
      (i) what the minimum training obligation of a company or group should be,
 
      (ii) whether the proposals in a training commitment are adequate to meet the minimum training obligation of a company or group, or
 
      (iii) whether a company or group has complied with its training commitment;
 
    (c) enabling an audit to be carried on on behalf of the Secretary of State of the accounts or other records-
 
      (i) of a qualifying single company, or
 
      (ii) of the qualifying companies in a group,
 
    for the purpose of checking that any return or information provided to the Secretary of State is correct.
      (2) A person commits an offence if without reasonable excuse-
 
 
    (a) he fails to make a return that he is required to make by regulations under sub-paragraph (1)(a),
 
    (b) having been directed under regulations under sub-paragraph (1)(b) to provide any information, he fails to comply with the direction, or
 
    (c) he obstructs a person carrying out an audit under regulations under sub-paragraph (1)(c).
 
Higher rate of payment in case of failure to meet training commitment
     31. - (1) The Secretary of State may by regulations provide that-
 
 
    (a) if a company fails to meet its training commitment in any period, the amount of any payments in lieu of training that fall to be made by the company in a subsequent period shall be at a higher rate; and
 
    (b) if a group fails to meet its training commitment in any period, the amount of any payments in lieu of training that fall to be made by any member of the group in a subsequent period shall be at a higher rate.
      (2) The regulations may contain provision as to-
 
 
    (a) the periods by reference to which it is to be determined whether a company or group has met its training commitment;
 
    (b) the circumstances in which a company or group is to be treated as failing to meet its training commitment;
 
    (c) the method of calculating the higher rate of payment; and
 
    (d) any circumstances in which the higher rate is not to be payable despite the failure of a company or group to meet its training commitment.
      (3) The regulations may make provision having the effect that the rate of payments in lieu of training is progressively increased if a company or group fails to meet its training commitment in successive periods.
 
 
Certificate of non-compliance
     32. - (1) The Secretary of State may by regulations make provision authorising the Secretary of State to issue a certificate of non-compliance in the following cases.
 
      (2) The regulations may authorise the issue of a certificate of non-compliance in respect of a single company if-
 
 
    (a) the company fails to meet its training commitment for successive periods amounting to not less than two years, or
 
    (b) the company, or any of its officers, commits an offence under this Schedule.
      (3) The regulations may authorise the issue of a certificate of non-compliance in respect of a group if-
 
 
    (a) the group fails to meet its training commitment for successive periods amounting to not less than two years, or
 
    (b) a member of the group, or an officer of a member, commits an offence under this Schedule.
      (4) If such regulations are made they shall provide that a certificate of non-compliance must be issued unless the Secretary of State is satisfied that there are good reasons why a certificate should not be issued.
 
      (5) No renewal election may be made in respect of a company or group in relation to which a certificate of non-compliance is in force.
 
 
Certificates of non-compliance: supplementary provisions
     33. - (1) The Secretary of State may make provision by regulations-
 
 
    (a) enabling a company or group in respect of which a certificate of non-compliance has been issued to apply to the Secretary of State to cancel the certificate;
 
    (b) requiring any such application to be in such form and contain such information as may be prescribed;
 
    (c) authorising or requiring the Secretary of State, when considering such an application, to consult any prescribed person involved in the training of seafarers;
 
    (d) as to the procedure to be followed where the Secretary of State is minded not to cancel a certificate of non-compliance.
      (2) The Secretary of State may by regulations make such provision as he thinks appropriate as to the effect on a certificate of non-compliance of a merger or demerger relating to the company or group in respect of which the certificate is in force.
 
 
Disclosure of information
     34. - (1) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents the disclosure of information-
 
 
    (a) by the Secretary of State to the Inland Revenue for the purpose of assisting the Inland Revenue to discharge their functions under the Corporation Tax Acts so far as relating to matters arising under this Schedule, or
 
    (b) by the Inland Revenue to the Secretary of State for the purpose of assisting the Secretary of State to discharge his functions under this Part of this Schedule.
      (2) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents the disclosure of information-
 
 
    (a) by the Secretary of State to any prescribed person involved in the training of seafarers, or
 
    (b) by any such person to the Secretary of State,
       for the purposes of assisting the Secretary of State to discharge his functions under this Part of this Schedule.
 
      (3) Information obtained by such disclosure as is mentioned in sub-paragraph (1) or (2) shall not be further disclosed except for the purposes of legal proceedings arising out of the functions referred to.
 
 
Offences
     35. - (1) It is an offence for a person to provide for any of the purposes of this Part of this Schedule information that he knows or has reasonable cause to believe is false in a material particular.
 
      (2) A person committing any offence under this Part of this Schedule, is liable-
 
 
    (a) on summary conviction, to a fine not exceeding the statutory maximum, and
 
    (b) on conviction on indictment, to a fine.
 
General provisions about regulations
     36. - (1) Regulations under this Part of this Schedule shall be made by statutory instrument which shall be subject to annulment in pursuance of a resolution of the House of Commons.
 
      (2) Regulations under this Part of this Schedule-
 
 
    (a) may make different provision for different cases, and
 
    (b) may contain such supplementary, incidental and transitional provisions as appear to the Secretary of State to be necessary or expedient.
      (3) In this Part of this Schedule "prescribed" means prescribed by regulations made by the Secretary of State.
 
      (4) Regulations under this Part of this Schedule may make provision as to the obligations of a company in respect of any part of the period-
 
 
    (a) beginning with 1st January 2000, and
 
    (b) ending immediately before the first regulations under this Part come into force,
       during which the company is, or is treated as having been, subject to tonnage tax.
 
  This includes power to require payments in lieu of training to be made in respect of any such part of that period.
 
  PART V
  OTHER REQUIREMENTS
 
The requirement that not more than 75% of fleet tonnage is chartered in
     37. - (1) It is a requirement of entering or remaining within tonnage tax-
 
 
    (a) in the case of a single company, that not more than 75% of the net tonnage of the qualifying ships operated by it is chartered in;
 
    (b) in the case of a group, that not more than 75% of the aggregate net tonnage of the qualifying ships operated by the members of the group that are qualifying companies is chartered in.
      (2) For this purpose a ship is "chartered in"-
 
 
    (a) in relation to a single company, if it is chartered to the company otherwise than on bareboat charter terms, or
 
    (b) in relation to a group, if it is chartered otherwise than on bareboat charter terms to a qualifying member of the group by a person who is not a qualifying member of the group.
  In paragraph (b) "qualifying member of the group" means a qualifying company that is a member of the group.
 
      (3) A ship shall not be counted more than once in determining for the purposes of sub-paragraph (1)(b) the aggregate net tonnage of the qualifying ships operated by the members of a group that are qualifying companies.
 
      (4) In the following provisions the requirement in this paragraph is referred to as "the 75% limit"-
 
 
    paragraph 38 (election not effective if limit exceeded), and
 
    paragraphs 39 and 40 (exclusion of company or group where limit exceeded).
      (5) References to the limit being exceeded in an accounting period are to its being exceeded on average over the period in question.
 
 
The 75% limit: election not effective if limit exceeded
     38. - (1) Where a tonnage tax election is made before the end of the initial period and the 75% limit is exceeded in the first relevant accounting period, the election is treated as never having been of any effect.
 
      (2) Where a tonnage tax election is made after the end of the initial period, then-
 
 
    (a) if the 75% limit is exceeded in the first relevant accounting period, the election does not have effect in relation to that period;
 
    (b) if the 75% limit is exceeded in the first and second relevant accounting periods, the election does not have effect in relation to either of those periods; and
 
    (c) if the 75% limit is exceeded in the first, second and third relevant accounting periods, the election is treated as never having been of any effect.
      (3) For the purposes of sub-paragraphs (1) and (2) the first, second or third relevant accounting period means-
 
 
    (a) in relation to a single company, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of the company after its entry into tonnage tax;
 
    (b) in relation to a group, the accounting period that, if the election had been effective, would have been the first, second or third accounting period of a member of the group that would have been a tonnage tax company.
      (4) Sub-paragraphs (1) and (2) do not apply to a renewal election.
 
 
The 75% limit: exclusion of company if limit exceeded
     39. - (1) If the 75% limit is exceeded in two or more consecutive accounting periods of a single company subject to tonnage tax, the Inland Revenue may give notice excluding the company from tonnage tax.
 
      (2) The effect of the notice is that the company's tonnage tax election ceases to be in force from such date as may be specified in the notice.
 
  The specified date must not be earlier than the beginning of the accounting period of the company that follows the second consecutive accounting period of the company in which the limit is exceeded.
 
 
The 75% limit: exclusion of group if limit exceeded
     40. - (1) If the 75% limit is exceeded in relation to a tonnage tax group in two or more consecutive accounting periods of any tonnage tax company that is a member of the group ("the relevant company"), the Inland Revenue may give notice excluding the group from tonnage tax.
 
      (2) The effect of the notice is that the group's tonnage tax election ceases to be in force from such date as may be specified in the notice.
 
  The specified date must not be earlier than the beginning of the accounting period of the relevant company that follows the second consecutive accounting period of that company in which the limit is exceeded.
 
      (3) Notice under this paragraph need only be given to the relevant company.
 
  This is subject to any arrangements under paragraph 120 (arrangements for dealing with group matters).
 
 
The requirement not to enter into tax avoidance arrangements
     41. - (1) It is a condition of remaining within tonnage tax that a company is not a party to any transaction or arrangement that is an abuse of the tonnage tax regime.
 
      (2) A transaction or arrangement is such an abuse if in consequence of its being, or having been, entered into the provisions of this Schedule fall to be applied in a way that results (or would but for this paragraph result) in-
 
 
    (a) a tax advantage being obtained for-
 
      (i) a company other than a tonnage tax company, or
 
      (ii) a tonnage tax company in respect of its non-tonnage tax activities,
 
    or
 
    (b) the amount of the tonnage tax profits of a tonnage tax company being artificially reduced.
      (3) In this paragraph "tax advantage" has the same meaning as in Chapter I of Part XVII of the Taxes Act 1988 (tax avoidance) (see section 709 of that Act).
 
      (4) A finance lease is not to be taken as being an abuse of the tonnage tax regime by reason of the lessor obtaining capital allowances as a result of the lease being, or having been, entered into.
 
  In this sub-paragraph "finance lease", and "lessor" in relation to such a lease, have the meaning given by section 82A of the Capital Allowances Act 1990.
 
 
Tax avoidance: exclusion from tonnage tax
     42. - (1) If a tonnage tax company is a party to any such transaction or arrangement as is mentioned in paragraph 41(1), the Inland Revenue may-
 
 
    (a) if it is a single company, give notice excluding it from tonnage tax;
 
    (b) if it is a member of a group, give notice excluding the group from tonnage tax.
      (2) The effect of the notice in the case of a single company is that the company's tonnage tax election ceases to be in force from the beginning of the accounting period in which the transaction or arrangement was entered into.
 
      (3) The effect of such a notice in the case of a group is that the group's tonnage tax election ceases to be in force from such date as may be specified in the notice.
 
  The specified date must not be earlier than the beginning of the earliest accounting period in which any member of the group entered into the transaction or arrangement in question.
 
      (4) The provisions of paragraphs 138 and 139 (exit charge: chargeable gains and balancing charges) apply where a company ceases to be a tonnage tax company by virtue of this paragraph.
 
      (5) Notice under this sub-paragraph (1)(b) need only be given to the company mentioned in the opening words of that sub-paragraph.
 
  This is subject to any arrangements under paragraph 120 (arrangements for dealing with group matters).
 
 
Appeals
     43. - (1) An appeal lies to the Special Commissioners against a notice given by the Inland Revenue under-
 
 
    paragraph 39 or 40 (exclusion of company or group from tonnage tax if 75% limit exceeded), or
 
    paragraph 42 (exclusion from tonnage tax of company or group where tax avoidance arrangement entered into).
      (2) Notice of appeal must be given to the Inland Revenue within 30 days of the date of issue of the notice appealed against.
 
      (3) In the case of a notice under paragraph 40 or 42(1)(b) only one appeal may be brought, but it may be brought jointly by two or more members of the group concerned.
 
 
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