Income Tax Act 2007 section 305

Excluded activities: leasing of ships

Section 305 sets out the circumstances in which a trade that involves letting ships on charter will not be treated as carrying on excluded activities for the purposes of the venture capital trust qualifying holdings rules.

• Ship chartering can qualify as a non-excluded activity provided the company beneficially owns all chartered ships, registers them in the United Kingdom, and is solely responsible for marketing their services
• Each charter must be for no more than 12 months, conducted at arm's length with an unconnected party, and the company must retain principal responsibility for management decisions and ship expenses throughout the charter period
• The arm's length requirement is relaxed where the charterer and the letting company are in the same qualifying subsidiary group structure
• Even if some lettings fail to meet the requirements, the trade is not treated as excluded provided those non-qualifying lettings and any other excluded activities do not together form a substantial part of the trade