»Ê¹ÚÌåÓýapp

Singleton company

FA00/SCH22/PARA61 sets out the rules for allocating finance costs between the tonnage tax and non-tonnage tax activities of a single company.

See TTM07410 for the meaning of ‘finance costs�.

Principle of fungibility

»Ê¹ÚÌåÓýapp rules operate on the presumption that finance is fungible. In other words, that any borrowings of a company serve to finance the activities of the company as a whole, even if they are initially earmarked for a particular project.

Just and reasonable apportionment

A company is required to consider its activities as a whole, and if any more than a just and reasonable proportion of any finance costs would otherwise be outside the tonnage tax ring fence, an adjustment is required.

»Ê¹ÚÌåÓýapp just and reasonable calculation of finance costs attributable to non-tonnage tax activities should take into account the fact that finance requirements differ from activity to activity. Shipping is generally a capital intensive activity due to the high cost of the assets and would usually be expected to absorb a significant part of any finance raised.

Adjustments required

If the company claims a deduction outside the tonnage tax ring fence for more than a just and reasonable proportion of its total finance costs an addition is made to its taxable profits.

»Ê¹ÚÌåÓýapp addition is treated as if it is a non-trading loan-relationship credit.

Further guidance

Further guidance on the allocation of finance costs is given in the following instructions:

• Broad approach of the legislation TTM07440,
• Computational principles TTM07450,
• Definition of finance costs TTM07410,
• Determining the just and reasonable fraction TTM07460,
• Examples TTM07470.

References

FA00/SCH22/PARA61 (finance costs � singleton company)	TTM17346
Outline of finance costs adjustment	TTM07400
Group companies	TTM07430