No News May be Good News for Shipping in UK Pre-Budget Report

LEADING shipping accountant Moore Stephens says the fact that the pre-budget report issued by the UK government on November 24 does not include any measures which significantly affect the shipping sector could be regarded as good news for the industry.

Although the government has been asked to make changes to UK tonnage tax, the report makes no mention of it. Moore Stephens tax partner Sue Bill says, “Possible changes to the tonnage tax regime could have included an amendment to the EU flagging rules excluding ships time-chartered into the fleet, and clarification of the position with regard to the changes proposed in January 2008 which were later withdrawn. But these are complex issues to resolve as they depend on agreement with the European Commission.

“In the current economic climate, it is not surprising that the relatively minor change to the tonnage tax regime which has been requested has not been made, and that the UK government’s position has not been clarified. Companies in the shipping sector may in any case have more pressing financial concerns at the moment. And, overall, the fact that there is not a great deal of specific interest for the shipping sector might be regarded as good news, because the taxation regime at least continues to be reasonably stable”.

The pre-budget report does, however, include some provisions which may be of interest to the shipping industry. For example, the Finance Bill 2009 is likely to include an exemption from tax for most foreign dividends, in conjunction with which there will be continued consultation on the options for reform of the rules relating to so-called ‘controlled foreign companies’ (CFCs). The government has also announced a review into the position of the UK’s crown dependencies and overseas territories as offshore financial centres.

Sue Bill says, “An exemption from tax for most foreign dividends may be helpful for multinational groups, but it remains to be seen how CFCs will be taxed.”

Contact Sue Bill, Moore Stephens LLP / email: [email protected]