Young professionals say London shipping must be adaptable and competitive

A new survey by The Shipping Professional Network in London (SPNL) has found that London must adapt to a fast-changing environment and improve its competitive edge in order to remain a relevant global maritime centre. Respondents to the survey also identified access to the single market and freedom of movement as key negotiating issues for shipping in the UK’s exit from the European Union.

The survey, organised in conjunction with international accountant and shipping adviser Moore Stephens, canvassed the opinions of young professionals working primarily in the shipowning, shipbroking, shipmanagement, chartering, banking and ship finance, advisory and associated industries in London. Respondents were asked for their views of the current state of the market, and how they believed it would perform over the next 12 months. They were also asked to identify the key challenges facing London as a maritime centre, and which aspects of the Brexit negotiations they considered to be most important for the preservation and continued development of London as a centre of global maritime commerce.

Respondents recorded an overall confidence level of 6.1, out of a maximum possible score of 10.0, in the markets in which they operate. This compares with the rating of 6.2 recorded when the survey was run previously, in September 2015.

On a scale of 1 to 10, respondents expressed an overall expectation of 5.8 when asked to gauge the likelihood of their business making a major investment or significant development over the next 12 months. This was unchanged from two years ago.

Competition, demand trends, and the cost and availability of finance were identified by respondents as the three leading factors most likely to affect their business performance over the next 12 months. 55% of respondents expected finance costs to increase over the coming year, compared to the 48% who thought likewise in 2015.

Respondents were also asked for their opinion of likely rate movements in the tanker, dry bulk, container ship and offshore markets over the course of the next year. 31% overall thought that tanker rates were likely to increase, as against 35% in the 2015 survey. In the dry bulk sector, 60% of respondents expected rates to increase, compared to the 35% recorded in 2015. Meanwhile, 42% of respondents expected rates to rise during the next 12 months in the container ship market, compared to 29% in 2015, and 31% expected rates to rise in the offshore maritime market.

Respondents were provided with a list of key challenges facing London in order for it to remain a relevant global maritime centre, and asked to choose the three options which they considered to be most important, in order of priority. ‘Competitiveness’ (unchanged from the previous SPNL survey in 2015) and ‘Ability to adapt to a fast-changing environment’ (up from 17% on the 2015 figure) were each identified by 23% of respondents. ‘Taxation’ (unchanged at 18 %) was in third place.

The number of respondents who identified education as a key challenge was down from 11% to 9%, the same number who expressed concern about the likelihood of there being insufficient numbers of professionals and shipowners operating in London.

On the specific question of Brexit, 21% of respondents identified access to the single market as the most important issue in negotiations for the UK’s exit from the EU. Freedom of movement (18%) featured in second place, followed by taxation / VAT / customs duties (15%) and regulatory issues (10%). Other factors cited by respondents included the legal framework (9%), passporting rights (8%), political sanctions and competition law (both 7%) and dispute resolution (6%).

Claudio Chistè, Chairman of SPNL, says: “The past two years have seen a continuation of the extremely difficult conditions which have plagued global economies since the beginning of the financial downturn in 2008. So it is not surprising that the level of confidence expressed by young shipping professionals working in the London market has declined, albeit very slightly, over the past two years.

“At a time of great uncertainty and change in many parts of the world, every major decision in shipping has to be weighed in the political and environmental scales, as well as the economic ones. And every decision should be made in the knowledge that, in many trades, there are too many ships operating at below-break-even rates, with the inevitable result that not everybody engaged in those trades is going to make money.

“Other, more recent issues may seem less pressing by comparison, but they are assuming increasing importance. Cyber-crime, for example, was barely considered as a significant threat to the industry two years ago. Now it is very near the top of the list in the minds of many. The next two years will also be highly instructive when it comes to footing the bill for compliance with the Ballast Water Management Convention.

“With these new problems, it is just as well that the new generation of shipping professionals continues to expand, bringing with it an approach which is fresh yet still informed by the older generation of professionals which has seen the shipping industry through many years of cyclical promise and disappointment. It is encouraging that talented young professionals are still attracted to the industry. This is just as it should be because, despite the problems, the net sentiment gleaned from our survey in terms of the prospects for rate improvements over the next 12 months is positive in the three main tonnage categories. Moreover, respondents to our survey rated the prospect of their business making a major investment over the next 12 months at 5.8 out of a possible 10.0.

“Today’s shipping professionals have to deal with Brexit and the massive potential implications for their future. SPNL members were divided in their views about whether Brexit would be good or bad for London as a maritime centre. Similarly, there was a divergence of opinion as to how best London can confront the issues it faces in terms of competition from other global shipping centres.

“It is not only about cost. It is also about service, flexibility, experience and tradition. London needs its cadre of young maritime professionals, and over time those young professionals will become the older generation of London-based expertise and experience. The next generation of professionals in London needs to rise to the new challenges as previous generations have done over the centuries.”

The Shipping Professional Network in London (SPNL) was founded in 2007 as a meeting place for young shipping professionals in London. Its vision is to promote and enhance London as a maritime financial centre, and to be the 'voice' of young shipping professionals in London by engaging with the broader shipping community.


Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as one of the leading shipping, offshore maritime and transport & logistics advisers. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 of $2.7 billion. www.moorestephens.co.uk


For more information:
Claudio Chistè
Chairman of SPNL
E: info@shippingnetwork.co.uk
W: www.spnl.co.uk

Moore Stephens warns on dangers of diving unprepared into shipping pools

International accountant and shipping adviser Moore Stephens has warned ship owners and operators to check carefully the financial, tax and jurisdictional implications of participating in shipping pool arrangements.

Shipping partner Michael Simms says, “Shipping pools can be an attractive option, particularly in difficult markets and during periods of economic uncertainty. Interest in the concept generally is increasing as a way to leverage money and maximise economies of scale. But while it might make good commercial sense for like-minded shipping interests to pool their resources to mutual advantage, traps may lie in wait for the unwary.”

Shipping pools can take a variety of forms, from incorporated entities or partnerships to joint-ventures and other forms of agreement. The jurisdiction in which the pool is established is of primary importance, since it will have fundamental tax and reporting implications.

Simms notes, “Historically, tax-friendly offshore jurisdictions have been a natural fit for many shipping pools, but the recent increased focus on general tax transparency and on proper governance and reporting procedures may serve as a catalyst for change in this regard. The existing structure of shipping pools established in offshore jurisdictions is unlikely to change, but it would be reasonable to expect the members of any new pool arrangements to at least consider the option of establishing the pool in a more traditional jurisdiction.

“A move towards greater corporatisation of shipping pools, which may grant access to trade finance solutions, might be a viable option for many owners, provided the terms of entry and exit are acceptable.”

Moore Stephens has advised on a number of pool agreements during the past 12 months. There are a range of tax issues to consider when setting up, amending or joining a pool. In the case of a new pool, it will be necessary to consider the tax position of each entity within the pool structure. Other important considerations include the terms of the pool agreement itself, the status of the pool under competition law, the effectiveness of the marketing strategy, and the way pool accounts are prepared and submitted.

Michael Simms concludes, “Shipping pools have clear advantages for some. But it is a challenging market, and one subject to increasingly stringent evaluation. It would be a mistake to just dive in without careful consideration.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime and transport & logistics adviser. Moore Stephens LLP is a member firm of Moore Stephens International Limited, one of the world's leading accounting and consulting associations, with 626 offices of independent member firms in 108 countries, employing 27,997 people and generating revenues in 2016 of $2.7 billion. www.moorestephens.co.uk


For more information:
Michael Simms
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
michael.simms@moorestephens.com

UK Budget 2016 provides surprises for shipping and radical measures for offshore maritime sector

Leading accountant and shipping adviser Moore Stephens says the UK Budget 2016 contains a number of surprise developments which are likely to be of interest to the shipping sector, as well as a radical set of measures which it is hoped will assist the offshore maritime oil and gas sector.

The Government announced a further reduction in the rate of corporation tax, which will be 17% from 1 April 2020. There are also significant reductions in the rates of capital gains tax. From 6 April 2016, the higher rate of capital gains tax for individuals will be reduced from 28% to 20%, and the basic rate will be reduced from 18% to 10%, although an additional 8% will apply for carried interest and for gains on some residential property. In addition, Entrepreneurs’ Relief will be extended to apply to long-term investors in unlisted companies. Under these new rules, a 10% rate of capital gains tax will apply for gains on newly issued shares in unlisted companies acquired on or after 17 March 2016, provided they are held for at least three years from 6 April 2016. There is a separate lifetime limit of £10 million of gains.

New measures to support the oil and gas sector, meanwhile, include the effective abolition of petroleum revenue tax by permanently reducing the rate from 35% to 0% with effect from 1 January 2016. The supplementary charge will also be reduced from 20% to 10% with effect from 1 January 2016. The Government will provide a further £20 million of funding for another round of seismic surveys in 2016-17, and extend Investment and Cluster Area Allowances to include tariff income in order to encourage investment in infrastructure maintained for the benefit of third parties. In addition, it will provide greater certainty that companies will be entitled to tax relief on decommissioning costs when they retain decommissioning liabilities for an asset after a sale. Other measures include a commitment from the Government to work further with the Oil and Gas Authority to reduce overall decommissioning costs, and a willingness to consider proposals for using the UK Guarantees Scheme for infrastructure where it could help secure new investment in assets of strategic importance to maximise economic recovery of oil and gas.

There are other items in the Budget which may be of interest to the maritime sector. A discussion document will be issued in Spring 2016 with options for changes to the tax treatment of leases of plant and machinery in response to new accounting standard IFRS16. Companies in tonnage tax are, however, unlikely to be affected by any such changes. Where a ‘close’ company makes a loan to a participator, the tax payable will be increased from 25% to 32.5% in April 2016, with effect for loans made on or after 6 April 2016.

The Government has announced changes to corporation tax loss relief aimed at achieving greater flexibility. For losses incurred on or after 1 April 2017, companies will be able to use carried-forward losses against profits from other income streams and other companies within a group. Currently such losses can only be offset against trading profits relating to the same trade arising in the same company. However, to the extent that profits are in excess of £5 million, it will only be possible to offset 50% of the profits using tax trading losses brought forward.

The Government is also to cap the amount of tax relief for interest payable to 30% of taxable earnings in the UK or based on the net interest earnings ratio for the worldwide group. There will be a threshold limit of £2 million net UK interest expense. Further details are yet to be announced.

Finally, there were some further announcements relating to the ongoing major reform to non domicile taxation. From 2017, non-doms who have been resident in the UK for more than 15 out of the previous 20 tax years will be taxed as if they are deemed UK domiciled. In addition, individuals with a UK domicile of origin will revert to that status for tax purposes when resident in the UK.

Moore Stephens tax partner Gill Smith says, “Significant changes to the treatment of long-term resident non-doms, to take effect from 6 April 2017, were originally announced in the 2015 Budget. For such a significant change to the taxation of this group of taxpayers, the lack of detail since the original announcement has been concerning.”

The Budget papers only make very limited, but potentially important, reference to the changes. These are:

Non-doms who become deemed domiciled from April 2017 will benefit from uplift in the cost basis of their non-UK assets. It remains to be seen whether this applies to assets held via offshore trusts or whether individuals who become deemed domiciled at a later date will also benefit from this uplift.

Non-doms who become deemed domiciled will benefit from transitional provisions with regard to offshore funds to provide certainty on how amounts remitted to the UK will be taxed, although again it is not clear whether this applies to those becoming deemed domiciled on 6 April 2017 or at a later date. This may give a measure of relief from the notoriously complex mixed fund rules which determine the source of remittances made to the UK by non-doms.

Confirmation that non-doms who establish offshore trusts before becoming deemed domiciled will not be taxed on income or gains retained within the trust. Previous updates have indicated that UK source income would remain taxable on the non-dom in these circumstances, but no reference is made to this in the Budget documents.

Gill Smith concludes, “The measures announced are helpful at least to some extent, but the details are limited and there are many other areas that need considering prior to April 2017. These delays cause uncertainty and may result in affected taxpayers choosing to leave the UK. There are no further announcements on the proposal to charge owners of UK residential properties held through non-UK structures inheritance tax with effect from 6 April 2017. Again, this lack of detail is unsettling for clients and more detail is urgently required.”

Moore Stephens LLP is noted for a number of industry specialisations and is widely acknowledged as a leading shipping, offshore maritime 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 657 offices of independent member firms in 106 countries, employing 27,613 people and generating revenues in 2015 of $2.7 billion. www.moorestephens.co.uk


For more information:
Gill Smith
Moore Stephens LLP
Tel: +44 (0)20 7334 9191
gill.smith@moorestephens.com

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

Moore Stephens says new UK statutory residence test does away with grey areas

International accountant and shipping adviser Moore Stephens says the introduction by the UK of a statutory residence test will bring much greater certainty to an area previously decided largely on the basis of case law and government practice.

The UK is introducing the statutory residence test with effect from 6 April, 2013.  Gill Smith, a tax partner with Moore Stephens, explains, “At present, there is no statutory definition of residence, but rather case law and HMRC practice.  This has resulted in residence being a rather grey area, but the new test should bring much greater certainty.”

Under the new test, individuals will always be resident if they spend 183 days in the UK.  As is the case now, a day counts if the individual is in the UK at midnight.  Automatic residence is also achieved if individuals are working in the UK full-time or, broadly, have their only home there.

Individuals are automatically non-resident if they are in the UK for less than 46 days in the tax year.  This limit is restricted to less than 16 days for an individual who has been UK-resident for one or more of the preceding three tax years.  Additionally, individuals are non-resident if they work full-time abroad.

For individuals who are neither automatically resident nor non-resident, there is a ‘sufficient ties test’.  The legislation sets out a number of ties, and the number of days in the UK that would make individuals UK-resident for a tax year is calculated according to the number of ties they have. For arrivers (individuals who have not been resident in the UK in any of the three previous tax years) the ties are: having family resident in the UK (family includes a spouse, partner or minor children); having accommodation available and using it for one night in the tax year; working in the UK for 40 or more days in the tax year for at least three hours per day; having been present in the UK for more than 90 days in either of the previous two tax years.

For leavers (individuals who have been resident in the UK in one of the previous three tax years) the day counts are more stringent. Leavers also have an additional tie to consider, namely that they are not in the UK more than any other single country. 

There are a number of specific rules dealing with matters such as split year, where an individual can be treated as non-resident part-way through the tax year, and the treatment of income and capital gains earned in periods of temporary non-residence.

International transportation workers, including seafarers, also have their own rules. In their case, the tests relating to working full-time in the UK or abroad are dis-applied when looking at the automatic residence or non-residence position.  When considering day-count, a work journey that starts in the UK is considered a day of UK residence, whereas one that ends in the UK is not.

“The statutory residence test for the 2013/14 tax year should give greater certainty regarding an individual’s residence position,” concludes Gill Smith.  “The basic rules are quite straightforward, but there is considerable detail to catch the unwary.”

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 624 offices of independent member firms in over 100 countries, employing 21,224 people and generating revenues in 2012 of $2.3 billion.

For more information:                                                 

Gill Smith                                                             

Moore Stephens LLP                                                     

Tel: +44 (0)20 7334 9191                                                 gill.smith@moorestephens.com