Section 230 — Exclusion of deduction, loss, set off, etc. Successor to s.115VL, s.115VM of the 1961 Act.
Section 230 is in Chapter XIII — Determination of Tax in Special Cases, which runs from section 190 to section 235.
Sub-section (1) overrides the rest of the Act for a tonnage tax company computing tonnage income for a year in which it is taxed under this Part, and does four things: sections 28 to 52 apply as if every loss, allowance or deduction relating to those years had already been given full effect in the year itself; losses under sections 108(1), 108(2)(b), 109(1), 112(1) and 116(1) relating to the business of operating qualifying ships cannot be carried forward or set off for years spent under the scheme; no Chapter VIII deduction is allowed on the profits of operating qualifying ships; and depreciation under section 33 is computed by reducing the written down value as if depreciation had been claimed and actually allowed for those years. Sub-section (2) applies section 112 to losses that accrued before the company opted for the scheme and are attributable to the tonnage tax business as if they had been set off against relevant shipping income during the scheme years. Sub-section (3) prevents those losses from being set off against anything other than relevant shipping income in any year beginning on or after the option under section 231 is exercised, and sub-section (4) requires any apportionment needed to identify them to be made on a reasonable basis.
Tonnage income is a notional figure computed on ship tonnage, so allowing the ordinary losses, allowances and deductions on top of it would relieve the same shipping activity twice. The section therefore treats every allowance as if it had been absorbed year by year and quarantines pre-entry shipping losses to shipping income, so nothing accumulates during the scheme years for use afterwards.
Do not expect to carry anything out of the tonnage tax years: losses of the qualifying ships business are treated as spent, depreciation is treated as claimed and allowed so the written down value falls whether or not it was claimed, and no Chapter VIII deduction attaches to those profits. Losses that accrued before entry and relate to the tonnage tax business are deemed absorbed against relevant shipping income and, from the year of the section 231 option onward, cannot be used against any other income. Where a company has both shipping and other business, sub-section (4) requires the split to be made on a reasonable basis, which makes the apportionment workings worth documenting.
A shipping company opts into the tonnage tax scheme under section 231 carrying a loss from its qualifying ship business. Sub-section (2) treats that loss as if it had been set off against relevant shipping income during the scheme years, and sub-section (3) then stops it being set against anything but relevant shipping income from the year the option was exercised — so it can never be turned against the company's other business income afterwards. At the same time sub-section (1)(d) computes the written down value of the ships as though depreciation had been claimed and actually allowed for each of those years, so the company comes out of the scheme with a written down value lower than its own books show. While it is in, sub-section (1)(c) allows no Chapter VIII deduction at all on the profits of operating qualifying ships.
It bites in the computation of tonnage income in the return of a company that has opted under section 231, and in the assessment where brought-forward losses, depreciation and Chapter VIII deductions are refused. It matters most at the point of exit, when the written down value and the pre-entry losses are worked out.
no deduction shall be allowed under Chapter VIII in relation to the profits and gains from the business of operating qualifying ships
See the full 1961 to 2025 concordance.
