Tonnage Tax : A sea change in UK shipping taxation

by Chris Morgan and Alastair Munro

It is a common place statement that the UK shipping industry has been in decline for the latter part of this century. There are many reasons for this trend, but this article focuses on the impact of fiscal policy on the decision as to where to locate a shipping business.

Successive Governments have understood that it is difficult for the British industry to compete with companies operating from countries which have the double advantage of a less costly regulatory environment and a low (or nil) tax rate. Hence they have sought to protect British shipping interests by such measures as certain grants for training and by special tax deprecation rules which apply only to the shipping industry. Nevertheless, the approach has been largely piecemeal and has only slowed and not reversed the decline. It is therefore a great relief to see that the present Government has taken this situation seriously by promising to introduce an entirely new regime – a tonnage tax regime – which will provide an effective low tax environment in the UK.

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