Government offers tax reform to revive UK shipping industry

Government offers tax reform to revive UK shipping industry

THEGOVERNMENT is to introduce new tax and training measures for the shipping industry in a bid to reverse a 20-year decline in the business.

The changes are also aimed at boosting the number of ships registered in the UK. In 1980 there were 1,300 ships in the UK fleet and 64,000 British seafarers. Today, there are 250 vessels and 18,000 seafarers.

In order to rejuvenate the industry, the Government plans to levy a new tonnage tax on shipping companies. This will be a low fixed rate of tax based on the tonnage of the vessels they use. At present, a complex and unpopular capital allowance system is operated, which allows companies to defer paying tax while they are investing in new ships.

However, the system means tax has to be paid if a shipbuilding programme comes to an end, and it also deflates the post-tax profits shown in a company’s accounts.

The Government will allow companies to carry on operating under the capital allowance scheme if they wish, or opt for the tonnage tax for 10-year periods.

However, to qualify for the tonnage tax, companies will have to make a formal commitment to offer training to seafarers. The condition requires them to recruit one cadet a year for every 15 existing officer posts.

The measures will be introduced in a finance Bill next year, but if it is passed the option to elect for the tonnage tax will be made retrospective to January 1 2000.

In a speech unveiling the plans, deputy prime minister John Prescott said: “Shipping is a growing global industry with an ever increasing demand for seafarers and for more tonnage – but Britain has been failing to grow with it. And it is that problem that we need to address.”

Cruise ship and ferry operating giant P&O responded to the initiative by promising to put at least 50 more of its ships on the UK register, taking its total to more than 100. These include ships in its Princess Cruises fleet such as Grand Princess, Dawn Princess, Sun Princess and Sea Princess, and ferries in its North Sea fleet such as European Leader and European Navigator.

A P&O spokesman said that if the tonnage tax had been in force last year its post-tax profit would have been £300m instead of £276m.


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