BDO says UK Chancellor’s Spring Statement contains no unwelcome surprises for shipping

Leading accountant and shipping adviser BDO says that, while the Spring Statement by the UK Chancellor of the Exchequer did not contain any shipping-specific initiatives, it did include some measures which could be of interest to the maritime sector.

Of particular interest to the offshore sector, the government called for evidence to identify what should be done in order to further strengthen the position of Scotland and of the UK in general as a global hub for decommissioning.

Detailed legislation was published in respect of the new capital allowances for structures and buildings which was announced in the UK Budget 2018. This relates to a new 2% capital allowance which will be available in respect of the construction costs (including land alteration and improvement expenditure) of new commercial non-residential structures and buildings. Very broadly, buildings must be used for a commercial purpose. This will apply where the contract is entered into on or after 29 October 2018.

A policy paper was also published on tackling tax evasion, tax avoidance and other forms of non-compliance, with the government reiterating that it will continue to build on the steps already taken. Another policy paper, ‘No Safe Havens’, was meanwhile published reiterating the government’s commitment to ensuring offshore tax compliance and preventing unfair outcomes, using international collaboration and the exchange of information

BDO tax partner Sue Bill says, “Once again, the absence of any shipping-specific measures is good news for the maritime sector, which continues to benefit from a tax regime which provides certainty and stability.”


The BDO Shipping & Transport team has extensive experience delivering accountancy, tax and advisory services to the sector worldwide. BDO delivers key information and insights to the shipping community, including the annual OpCost report, the quarterly Shipping Confidence Survey and a host of thought leadership on topical issues, such as regulatory developments and market conditions. https://www.bdo.co.uk/en-gb/industries/shipping-and-transport

Accountancy and business advisory firm BDO LLP provides integrated advice and solutions to help businesses navigate a changing world.

Our clients are Britain’s economic engine – ambitious, entrepreneurially-spirited and high-growth businesses that fuel the economy.

We share our clients’ ambitions and their entrepreneurial mind-set. We have the right combination of global reach, integrity and expertise to help them succeed.

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BDO LLP operates in 17 locations across the UK, employing nearly 5,000 people offering tax, audit and assurance, and a range of advisory services. BDO LLP has underlying revenues of £590m and is the UK member firm of the BDO international network.

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Moore Stephens urges changes to UK tonnage tax vessel written-down values

International accountant and shipping adviser Moore Stephens has made representations to Her Majesty’s Revenue & Customs (HMRC) about changing the way in which the written-down values of vessels are calculated under the UK tonnage tax rules, which it considers are not realistic in terms of their interaction with the capital allowances regime.

Moore Stephens tax partner Sue Bill says, “Where a company exits tonnage tax other than on the expiry of an election, and still owns ships, unless a ship falls within the definition of a ‘long-life asset’, its cost for capital allowances purposes is written down broadly as if the company had claimed capital allowances at 25 per cent on a reducing balance basis for each year that it owned the ship.

“The company’s ships are therefore likely to have relatively low tax written-down values which will bear no relation to the capital allowances that would have been claimed if the company had not been in tonnage tax for the relevant period. As a result, the company is likely to exit tonnage tax with large deferred tax liabilities. This will apply to companies that cease to satisfy such requirements for the tonnage tax regime as the strategic and commercial management tests.”

Moore Stephens considers that the tax written-down value should be calculated in a different way. Sue Bill explains, “Other possible methods are to write down the cost of the vessel to market value, or for the cost of the vessel to be depreciated on a time-apportionment basis, bearing in mind its expected economic life when new. Another possible but less beneficial option, although one which is likely to be more acceptable to HMRC, is to adjust the existing rules so that the cost is written down in line with the normal rates for plant and machinery capital allowances, which have reduced from 25 per cent to 18 per cent.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 667 offices of independent member firms in 105 countries, employing 27,081 people and generating revenues in 2013 of $2.7 billion. www.moorestephens.co.uk


For more information:
Sue Bill
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
sue.bill@moorestephens.com

UK Budget good news for shipping despite mixed news for non-doms

Leading accountant and shipping adviser Moore Stephens says that, despite mixed news for non-UK-domiciled individuals, the UK Budget 2011 appears to be good news for shipping.

The bad news in the Budget, announced on 23 March, is that the existing annual remittance basis charge for non-doms resident in the UK for twelve years or more will increase from £30,000 to £50,000, albeit not until 6 April, 2012.

The good news is that the government also proposes not to tax foreign income or capital remitted to the UK for the purposes of ‘commercial investment in UK businesses’, and to simplify some aspects of the current rules for non-doms to remove administrative burdens, which increased significantly from April 2008. It is also proposed that no other substantive changes to the rules for non-doms will be made for the rest of this parliament. The government will issue a consultation document in June with a view to implementing the rules from 6 April, 2012.

Sue Bill, a tax partner with Moore Stephens, says, “The government will also be consulting on the introduction of a statutory definition of residence. Under current rules, the residency of individuals is a very grey area and greater certainty is only to be welcome. Again a consultation document is proposed for June with implementation of the new measure from April 2012. It is unlikely that there will be more detail until June, but the timetable should provide time for adequate planning.

“Overall, there seems to be an acceptance by the government of the positive impact that inward investment by non-doms brings to the UK”.

Other, minor changes in the Budget include a change to the rate of capital allowances on ships which are leased to tonnage tax companies. The rate of writing-down allowances that can be claimed on the first £40 million of expenditure will be aligned with the rate applicable to other ships, including where the ship is a long-life asset. This legislation has effect for expenditure incurred on or after 1 January, 2011, and is likely to reduce the rate of writing-down allowances in respect of such ships.

There is also a new exemption from tax on foreign branches of UK companies whereby a UK company operating outside the UK through a foreign branch will be able to make an election to exempt the profits of its foreign branches from UK corporation tax. Such companies may be able to reduce or eliminate the UK corporation tax payable on branch profits by offsetting foreign tax paid on these profits in any case. This new foreign branch exemption, however, does not apply to shipping, to the extent that the foreign branch is not taxed in the overseas jurisdiction as a result of the terms of a double tax treaty.

Minor changes have also been made to the ‘controlled foreign company’ (CFC) rules. The de minimis exemption is to be increased to companies with chargeable profits below £200,000 per annum, and there will be a statutory three-year exemption from these rules for foreign subsidiaries that come within the scope of the CFC regime as a consequence of a reorganisation or change to UK ownership. There will be further consultation on these rules.

Finally, corporation tax rate will be reduced by a further 1 per cent, so that, from April 2011, the corporation tax rate will be 26 per cent and, by 2014, it will be 23 per cent.

Sue Bill says, “There is mixed news for non-UK-domiciled individuals. But there are few other changes that will affect shipping. The government has emphasised the need for stability, and clearly intends to consult before making any major taxation changes. The government has also emphasised the need for the UK corporation tax regime to be attractive to international businesses. Overall, it seems to be good news for shipping.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 638 offices of independent member firms in 97 countries, employing 20,588 people and generating revenues in 2010 of $2.15 billion. www.moorestephens.co.uk

For more information:
Sue Bill
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
sue.bill@moorestephens.com

Moore Stephens says capital allowance changes could represent tax blow for shipowners

Leading accountant and shipping industry adviser Moore Stephens has warned that the tax advantages available in respect of capital expenditure on ships may be greatly reduced following changes to the UK capital allowance regime which came into effect on 1 January 2011.

Ships have traditionally enjoyed significant tax advantages over other types of assets. Prior to 1 January 2011, ships outside tonnage tax were specifically excluded from the long-life asset regime, and the normal rate of writing-down allowances therefore applied. But, following changes to the capital allowance rules, expenditure on ships incurred on or after 1 January 2011 is no longer excluded from the regime, under which the writing-down allowances are considerably lower than those for other assets. Ships acquired prior to 1 January 2011 will continue to be excluded from the long-life asset rules.

The writing-down allowance available on ships outside the long-life asset regime is 20 per cent per annum up to 1 April 2012, and 18 per cent thereafter, on a reducing balance basis. The comparable allowances for long-life assets, meanwhile, are 10 per cent and 8 per cent per annum.

An asset may be regarded as long-life if it is reasonable to expect that it will have a useful economic life of at least 25 years when it is new. Sue Bill, a tax partner with Moore Stephens, says, “Some ships may reasonably be expected to have a useful life of at least 25 years when they are new, and may therefore be regarded as long-life assets. But this will depend on the type of vessel involved.

“Broadly speaking, the date when expenditure is regarded as having been incurred for capital allowance purposes is the date when there is an unconditional obligation to pay. In the case of a shipbuilding contract, although the obligation to pay for that part of the asset that has been completed becomes unconditional when the work is certified, there are exceptions to the general rules.

“The date when expenditure is regarded as having been incurred will also depend on whether or not the company incurring the expenditure is already carrying on an existing trade as a shipowner or operator. Where a company is not yet trading, expenditure is regarded as having been incurred for capital allowance purposes on the date the company starts to trade. This will usually be the date when the ship is delivered. Where the exact date is important, specific advice should be obtained.

“Companies which incur expenditure on ships after 1 January 2011 will now have to consider whether the ships may reasonably be expected to have a useful life of at least 25 years when new when claiming capital allowances. It is likely to be beneficial if this is not the case.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping and insurance adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 630 offices of independent member firms in 98 countries, employing 20,864 people and generating revenues in 2009 of $2,078 million. www.moorestephens.co.uk
For more information:
Sue Bill,
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
email: sue.bill@moorestephens.com