UK Tightens Leasing Criteria

The United Kingdom Inland Revenue issued a clarification notice regarding the use of offshore-onshore structures for UK tax leases of vessels, according to Tom Kane of Global Capital Finance. Formerly, in the circumstance where there was a chain of leases, only one lessee had to satisfy the criteria set out to qualify them as a bona fide UK ship operator. With effect from February 3rd, all lessees must satisfy these criteria. Leases entered into before February 3, 2005 or within three months of this date providing that the terms had been agreed prior to it, will not be subject to the revised regulation, nor will time-charter arrangements or contracts of affreightment. Mr. Kane assures us that even after the change takes effect, the UK lease should remain “a highly effective and tax efficient method of financing vessels.”

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