Ships which fly Union Jack could get tax break under 'Brexit freedom' plans

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Shipping companies will be offered tax breaks if they fly the Union Jack, under Budget plans to lure the world’s biggest fleets to the UK.

Ships which fly Union Jack could get tax break under 'Brexit freedom' plans
© Ben Stansall/AFP via Getty Images A container ship arrives at the Port of Felixstowe, in Suffolk. Firms have been promised tax breaks if they fly the Red Ensign, which has the Union Jack in the upper left hoist – Ben Stansall/AFP via Getty Images

Rishi Sunak, the Chancellor, is to use the freedoms provided by Brexit to open up the UK’s more generous tax regime to global shipping companies.

Shipping firms flying the Red Ensign – a red flag with the Union Jack in the upper left hoist – will stand a better chance from April next year of being accepted when applying for the UK’s tonnage tax regime.

Companies had to abide by European rules when the UK was part of the EU, which meant those flying the Red Ensign could not be treated any differently to those registered in the EU and flying other flags.

Mr Sunak will announce in his Budget that companies investing in “greener” environmentally-friendly ships will also be prioritised for the tax regime, because of their potential to help the UK achieve net-zero emissions by 2050.

Ships which fly Union Jack could get tax break under 'Brexit freedom' plans
© Provided by The Telegraph What we know will be in the Budget

It is hoped the move will encourage more international shipping firms to fly the Red Ensign and boost the UK economy by having headquarters in the UK.

Bid to ‘help the UK shipping industry to grow and compete in the global market’

Mr Sunak said: “The UK has always been a proud and preeminent maritime nation, with 95 per cent of our trade in goods carried out by sea.

“Now we have left the EU, it’s time for us to do even more to help the UK shipping industry to grow and compete in the global market.”

Ships which fly Union Jack could get tax break under 'Brexit freedom' plans
© Provided by The Telegraph Rishi Sunak is expected to announce the financial incentives in his Budget – Aaron Chown/PA Wire

The Red Ensign Group is a collaboration of UK shipping registries including British Overseas Territories and Crown dependencies. It takes its name from the Red Ensign (“Red Duster”) flag flown by British civil merchant ships. 

Its stated purpose is to combine resources to maintain safety and quality across the British fleet. As of 2018, it was ranked as the ninth largest such group in the world, with approximately 1,300 vessels.

Move could safeguard thousands of jobs

Tonnage tax regimes help countries to attract shipping companies through offering competitive tax rates.

When a shipping business participates in the UK’s tonnage tax regime, they can pay less tax by paying based on the amount they can carry, rather than the profits they make. 

Global competition has ramped up over recent years, as more countries have developed their own regimes. Each one offers different benefits for the firms they can attract. 

Ministers hope the new tax move will increase and safeguard more than 670,000 jobs currently supported by the shipping sector in coastal communities.

The regime will also be extended to ships that lay cables to help create wind farms, scientific research vessels.

Cruise companies could also benefit, as they will no longer have to audit their finances after every voyage, reducing their administration.

The tax scheme is estimated to generate an extra £3.1 billion to the benefit of the economy and safeguard 37,000 jobs that would otherwise have been lost, according to a 2015 report by the Centre for Economics and Business Research.

Gavin Simmonds, policy director commercial at the UK Chamber of Shipping, welcomed the package – saying it would “immediately strengthen the UK flag shipping, encourage innovation in the offshore energy sector and attract international investment”.

He added: “It will be important to maintain positive momentum and deliver improvements to the training commitment and to find ways of opening the regime to other shipping businesses in the next year.”

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