Minutes of the Taxation and Economics Committee meeting

Held1430 onMonday 12 February2018

UK Chamber of Shipping, 30 Park Street

Attending

Richard Greiner, Chairman, Moore Stephens

Gavin Simmonds, Secretary

Jonathan Campbell, MSC

Sue Bill, Moore Stephens

Peter Shaw, Maersk

Elinor Dautlich, HFW (by phone)

Philip Parr, Moore Stephens

Tim Walton, Carnival UK

Robert Merrylees, UKCoS

Katrina Ross, UKCoS

Matthew Wright, UKCoS

Apologies

Richard Stephens, WFW

Peter Casey, KPMG

  1. Welcome and apologies
As recorded.
  1. Minutes of previous meeting
The minutes of the previous meeting held on 24 October were accepted as correct and the Tonnage Tax action was carried forward into the agenda.
  1. Tonnage Tax

Pre-Brexit Issues and TT Study
The scope and programme for discussing possible improvements to the extant regime were considered and it was agreed that greater flexibility should be sought.It was noted that being able to undertake the UK’s pre-clearance procedure before entering into tonnage tax was an advantage for businesses.
It was agreed that Brexit justified a new election window.It was considered that the opportunity to explore *how the strategic and commercial management test could be considered as a single concept rather than currently interpreted as a two-tier test, due to the difficulties that were potentially caused by the parent-subsidiary relationship in needing to consult when making major investment decisions. It was also considered that it would be useful if flagging into the UK could be considered with more weight (though not made mandatory) when considering the overall factors that have been fulfilled in order for a company to meet the strategic and commercial management test.**It was also considered that, along with the Chamber’s overall strategy for tonnage tax and as long as it would not be detrimental to existing tonnage tax companies, it was agreed that the UK Chamber would be free to pursue the inclusion of wind farm construction vessels into UK tonnage tax, in line with the EFTA approval for the expansion of the Norwegian tonnage tax regime. Members were informed that the UK Chamber’s Offshore Panel approved of this approach.
It was observed that the UK’s tonnage tax regime should be focused on attracting overseas investment from outside the EU, rather than from other EU member states with an ambition to win business and custom from the ROW rather than other EU member states.
The Chamber would producea full list of items for the meeting to be held with DfT, HMRC and HMT on 23 March.
On the training requirement it was decided that training and employment issues were outside the expertise of the committee and that the Chamber should refer the question of what changes could be made to DfT & Chamber experts, perhaps in consultations with social partners. It was the committee’s view that any dialogue on Smart Plus must be informed by an input by these others groups but that further flexibility including a possible tapering of the training commitment for very large company groups should be sought.
Action: Chamber to progress aprompt but positive review of key TT issues and produce a spectrum of options with a focus of remaining incompliance with EU SAGs while noting for completeness the freedoms which might be achieved outside of the SAGs
  1. Double Taxation Agreements, Germany, Italy, others
The Chamber monitors DT agreements and members were reminded to report issues arising.
  1. EU List of non-co-operative jurisdictions for tax purposes
The EU list of non-cooperative tax jurisdictions agreed by Member States and first published on 5 December 2017 was discussed. It was noted that the list, which originally had consisted of 17 jurisdictions had seen eight, including Barbados and Panama, removed from the EU list as of 23 January 2018 for commitment to address deficiencies. Of the nine still on the list, it was noted that the Marshall Islands was of some significance for the shipping industry.
  1. OECD: Base erosion and profit sharing (BEPS)
As a deliverable of BEPS, the UK’s restriction of interest deductibility was reported, although it was noted that this was not applicable to tonnage tax companies. Furthermore it was recognised that the BEPS initiative was a multi-lateral instrument designed to reduce treaty switching and affect all multi-national industry groups and not just shipping companies.
  1. Maritime Growth Study Review and UKSR report
The latest review report was discussed and it was noted that little progress on the majority of items of significance had been made since the original proposals contained within the 2015 Maritime Growth Study (MGS).. Furthermore,it was considered that many of the concerns and input provided to the 2015 MGS were never included in the latest review report. Progress of some significance was observed in the UK Ship Register (UKSR), alongside the Maritime and Coastguard Agency’s Survey and Inspection Transformation programme.
The committee expressed the view that most technical UKSR issues were outside the expertise of members and the remit of the T & E committee,although undoubtedly important. Action: UKSR paper to be amended and UKSR Review issues raised to be taken forward by Chamber and reported to the committee at the next meeting.
  1. Economics Update
Brief reference was made to the CEBR report which was commissioned by Maritime UK to quantify the impact of UK shipping and wider maritime activities. The committee was encouraged to make use of the existing data and positive findings prior to the material being refreshed in 2019.
The announcement by DfT of the launch of SMarT Plus and the doubling of funding for seafarer training from £15m to £30m per year was widely welcomed. Given the Government objective to have 1200 cadets per year entering the industry, further financial support for training junior officers to their second certificate was seen as a positive step.
Action: The Chamber to provide a more detailed report at the next meeting once arrangements and scope of SMarT Plus had been determined.
  1. Brexit and alignment of work streams with other committees
Chamber actions on Brexit and the latest meeting of the Brexit Forum and Brexit Core Group were reported and the Chamber series of Position Papers were mentioned. It was agreed that Taxation and Economic issues should be aligned and feed into with the Chamber’s other Brexit work and that the Tonnage Tax and UKSR paper reflected this.
  1. AoB
The introduction of IFRS 16 in January 2019 was discussed and these detailed new requirements that were only just being considered by owners. It was timely that an evening seminar detailing these changes was scheduled to take place after the meeting and the Chamber expressed appreciation to Moore Stephens and Watson Farley Williams for supporting the event which was expected to be well attended by Chamber members.
No other business was raised.
  1. Date of next meetings
The next committee meeting will take place starting at 2.30 pm on Wednesday 13 June and thereafter on… insert revised date not 30 October….
GWS 20.02.18