Brexit: Expert warns of retail ‘backlog’ at ports

The Government is putting together proposals to overhaul UK shipping tax laws to enable more vessels, including oil rigs, to be classified as ships after Brexit, the Financial Times has reported. Industry bodies and unions have been briefed over the reform of the shipping industry’s tonnage tax from January 1, 2021, by which time the UK will have cut all ties with the European Union and no longer be subject to the bloc’s state aid regime on subsidies. The plans, which were due to be submitted to ministers at the Department for Transport last week, are being developed as the negotiations on a post-Brexit trade deal between the UK and EU in Brussels reach a critical point, with just two weeks left until the transition period deadline expires on December 31.

One of the remaining stumbling blocks in the ongoing talks is the issue of managing Britain’s regulatory divergence.

But the Government has calculated that revamping the shipping tax and regulation regime could be worth £3.7billion to the economy over three years.

The move would also create 2,500 jobs directly, with a further 25,000 created in related industries.

These proposals include expanding the scope of the UK scheme by beginning to consider oil rigs as “ships” for tax purposes as part plans to attract more business.

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This is currently prohibited under EU rules which for the time being control the subsidy of maritime transport.

At least for the next two weeks until the end of the transition period, tonnage tax regimes are signed off by the bloc’s state aid authorities.

The rules present shipping firms with a way of avoiding corporation tax in exchange for registering and managing their vessels in an EU country.

But among the plans being discussed by ministers is to enable floating production storage and offloading vessels and drilling rigs to be included in the UK tonnage tax regime.

They believe this would allow Britain to gain a competitive edge over EU regulations currently in place.

A Government-funded scheme worth £30million to train cadets directly on behalf of shipping companies has also been suggested.

A report prepared by the Government has warned that since the Brexit referendum in 2016, the tonnage of ships registered under the UK flag has plummeted by a third because of the continued uncertainty over Britain’s departure from the EU.

But the latest proposals from ministers argues this could be countered with a “hearts and minds” campaign to persuade shipping companies to register their vessels under the UK flag.

It would also fit with the rhetoric from Mr Johnson for Britain to “take back control” and restore the country’s ability to compete with the best in the world as a maritime nation.

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It would also fit with the rhetoric from Mr Johnson for Britain to “take back control” and restore the country’s ability to compete with the best in the world as a maritime nation.

Alternatively, firms that decide to flag their vessels in the UK could face a “lighter touch” test over how much of their shipping is managed in the UK.

The Financial Times has reported the proposal it has seen repeatedly references Singapore as a benchmark for the UK’s post-Brexit aspirations.

A Department for Transport spokesperson said: “We do not comment on leaks.”

Research from the UK Chamber of Shipping shows the country’s shipping and wider maritime industry employs more than 200,000 people and contributes over £46billion a year to the economy.

The chamber confirmed it is currently working with the Government to look at all available options to boost the UK as an international shipping hub.

A spokesman told the Financial Times: “As we leave the EU, we have the opportunity to develop our national shipping regime as we will no longer be bound by EU rules.”

David Blumenthal, a tax partner with Clyde & Co, which manages tonnage tax issues, believes Brexit provides the UK with an opportunity to make the country a more attractive destination for shipping companies to conduct their business.

He told the Financial Times: “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.”

The UK tonnage tax scheme was launched in 2000 by John Prescott, who was serving as the deputy to then-Prime Minister Tony Blair.

This scheme includes a requirement for companies to train cadets, which the new proposals suggested could be taken on by the government as a form of subsidy.

But further research from the Government has revealed his training requirement makes the UK tonnage tax up to 14 times more expensive than Singapore.

It is also up to 10 times the cost in permissive EU jurisdictions such as Malta and Cyprus.

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