Britain plans to rival S’pore with ship registry revamp
Britain is drawing up plans to turn London into a rival of Singapore as a hub for shipping companies to register vessels after the Brexit transition period, according to sources.
Industry bodies and unions have been canvassed over the reform of the shipping industry’s so-called tonnage tax after Jan 1 next year, when Britain is no longer subject to the European Union’s state aid regime on subsidies.
According to calculations provided to the government, revamping Britain’s shipping tax and regulation regime could be worth £3.7 billion (S$6.6 billion) to the economy over three years and create 2,500 high-quality jobs directly, as well as 25,000 in related firms.
Plans due to be submitted to ministers at the Department for Transport last week included expanding the scope of the British scheme by counting oil rigs as “ships” for tax purposes – which is not allowed under EU rules controlling the subsidy of maritime transport – in order to attract more business.
A £30 million government-funded scheme to train cadets directly on behalf of shipping companies has also been mooted.
A spokesman for the Department for Transport said: “We do not comment on leaks.”
Since the Brexit vote, the tonnage of ships registered under the British flag has declined by a third, according to a report prepared for the government, because of uncertainty about leaving the bloc.
The proposals argue that this could partly be addressed with a “hearts and minds” campaign to persuade shipping firms to register their vessels under the British flag.
Among the plans being discussed is enabling floating production storage and offloading vessels and drilling rigs to be included in the British tonnage tax regime in order to give Britain a competitive advantage over current EU regulations.
Mr David Blumenthal, a tax partner with Clyde & Co who handles tonnage tax issues, said Britain’s departure from the EU was an opportunity.
“The idea is that if we’re not constrained by EU state aid, we could have more ability to do things that would make the UK more attractive to shipping companies,” he said.
In the EU, tonnage tax regimes are signed off by the bloc’s state aid authorities. The rules offer shipping companies a route to avoid corporation tax in exchange for registering and managing their vessels in an EU country.
Another suggestion is that companies that choose to flag their vessels in Britain could face a “lighter touch” test for how much of their shipping is managed in Britain – a crucial requirement under EU tonnage tax regimes.
The proposal seen by the Financial Times repeatedly references Singapore as a benchmark for Britain’s post-Brexit aspirations.
The British tonnage tax scheme also includes a requirement for companies to train cadets, which the new proposals suggested could be taken on by the government – a form of subsidy.
Research for the government has shown this training requirement makes the British tonnage tax up to 14 times more expensive than in Singapore and between eight and 10 times the cost in permissive EU jurisdictions such as Malta and Cyprus.
The shipping and wider maritime industry employs more than 200,000 people and contributes over £46 billion a year to the British economy, according to the UK Chamber of Shipping.
The chamber confirmed it was working with the government to explore options to enhance Britain as an international shipping hub.
Source: Financial Times