Arrow Prospectus - PGS

ARROW SEISMIC ASA – INITIAL PUBLIC OFFERING
Qualification and entry
There are numerous qualifying conditions which must be met in order to enter into the UK tonnage tax regime.
A qualifying company or group must elect in order for the regime to apply. This election generally has effect for
10 years, unless a company or group ceases to qualify for the tonnage tax regime.
Elections can be made by qualifying companies, within 12 months of becoming a qualifying company and in
other specific circumstances.
To benefit from the regime a company must be subject to corporate income tax in the UK and operate qualifying
ships which are strategically and commercially managed in the UK. A group qualifies if one or more members
are qualifying companies. There are restrictions on the percentage of ships that may be time-chartered in and
other anti-avoidance provisions.
Training requirement
Companies are eligible for tonnage tax benefits only if they meet the minimum training obligation. According to
the size of the fleet and number of officers employed the company have an obligation to train a specified number
of officers.
The tonnage tax company’s training plan must be approved before HMRC will permit entrance into the tonnage
tax regime. These plans then need to be submitted annually, in order to maintain tonnage tax status.
Method of calculation
A company or group of companies in relation to which a tonnage tax election has effect is a Tonnage Tax
Company (‘TTC’) or Tonnage Tax Group (‘TTG’). For the purposes of corporate income tax, a TTC’s relevant
shipping profits (‘RSP’) are replaced by tonnage tax profits (‘TTP’).
TTP is calculated by reference to the qualifying daily net tonnage of each ship operated by a TTC. The net
tonnage is multiplied by:
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£0.60 per 100 tons to 1,000 tons
£0.45 per 100 tons between 1,000 tons and 10,000 tons
£0.30 per 100 tons between 10,000 tons and 25,000 tons
£0.15 per 100 tons above 25,000 tons
The TTP is the aggregate of the calculations for each ship. The normal corporation tax rate of 30% (likely to be
28% in 2008) is then applied to the TTP.
The relevant shipping profits are made up of four different elements:
1) Income from operating qualifying ships, but excluding certain income, for example income from
exploratory operations on the UK continental shelf and certain bareboat chartering income.
2) Dividends received from non-UK shipping companies which would qualify for UK tonnage tax if they
were UK resident and subject to UK corporation tax.
3) Interest, foreign exchange gains/losses and profits on interest rate and currency contracts which are so
closely related to core tonnage tax activities that they are not treated as investment income; and
4) Gains arising on the disposal of assets used for the tonnage tax trade.
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