Chapter TTM07420
Published date | 19 March 2016 |
Record Number | TTM07420 |
Court | HM Revenue & Customs |
Issuer | HM Revenue & Customs |
FA00/SCH22/PARA61 sets out the rules for allocating finance costs between the tonnage tax and non-tonnage tax activities of a single company.
See TTM07410 for the meaning of ‘finance costs’.
Principle of fungibilityThe rules operate on the presumption that finance is fungible. In other words, that any borrowings of a company serve to finance the activities of the company as a whole, even if they are initially earmarked for a particular project.
Just and reasonable apportionmentA company is required to consider its activities as a whole, and if any more than a just and reasonable proportion of any finance costs would otherwise be outside the tonnage tax ring fence, an adjustment is required.
The just and reasonable calculation of finance costs attributable to non-tonnage tax activities should take into account the fact that finance requirements differ from activity to activity. Shipping is generally a capital intensive activity due to the high cost of the assets and would usually be expected to absorb a significant part of any finance raised.
Adjustments requiredIf the company claims a deduction outside the tonnage tax ring fence for more than a just and reasonable proportion of its total finance costs an addition is...
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