697P Withdrawal of relief etc. on company leaving tonnage tax.

(1) This section shall apply where a company ceases to be a tonnage tax company—

(a) on ceasing to be a qualifying company for reasons relating wholly or mainly to tax, or

(b) under section 697F.

(2) Where this section applies, section 697N shall apply in relation to chargeable gains (within the meaning of the Capital Gains Tax Acts), but not losses, on all relevant disposals as if the company had never been a tonnage tax company and for this purpose a “relevant disposal” means a disposal—

(a) on or after the day on which the company ceases to be a tonnage tax company, or

(b) at any time during the period of 6 years immediately preceding that day when the company was a tonnage tax company.

(3) Where subsection (2) operates to increase the amount of the chargeable gain on a disposal made at a time within the period mentioned in subparagraph (2)(b), the gain is treated to the extent of the increase—

(a) as arising immediately before the company ceased to be a tonnage tax company, and

(b) as not being relevant shipping profits of the company.

(4) No relief, deduction or set-off of any description shall be allowed against the amount of that increase or the corporation tax charged on that amount.

(5) Where this section applies and in a relevant accounting period during which the company was a tonnage tax company the company was liable to a balancing charge in relation to which paragraph 16 or 17, as appropriate, of Schedule 18B applied to reduce the amount of the charge, then the company shall be treated as having received an additional amount of profits chargeable to corporation tax equal to the aggregate of the amounts by which those balancing charges were reduced.

(6) For the purposes of subsection (5) a “relevant accounting period” means an accounting period ending not more than 6 years before the day on which the company ceased to be a tonnage tax company.

(7) The additional profits referred to in subsection (5) shall be treated—

(a) as arising immediately before the company ceased to be a tonnage tax company, and

(b) as not being relevant shipping profits of the company.

(8) No relief, deduction or set-off of any description shall be allowed against those profits or against the corporation tax charged on them.