The tonnage tax regime is very tightly 'ring fenced' to ensure that only income and expenses that properly belong to the ship operation trade are included within relevant shipping profits (D7.1014), and that all other income and expenses are taxed under the normal corporation tax rules1.
The following terms are pivotal to the operation of the ring fence principle.
Accounting periods
An accounting period will start on entry into the tonnage tax regime and an accounting period will end on exit from the regime. This rule is relevant where an election is made other than during the initial and further periods (D7.1002), or where a company enters or leaves the tonnage tax regime through a merger or demerger (D7.1026)2.
Separate tonnage tax trade
A company's tonnage tax activities are treated as a separate trade for corporation tax purposes. However, the special rules that would otherwise apply on the commencement or cessation of a trade do not apply in relation to entry into, or exit from, the tonnage tax regime3.
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