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Shipping accountant and industry adviser Moore Stephens
has warned shipping companies to be ready for the imminent
withdrawal of a concession relating to the application of
transfer pricing rules to loans made to companies in the
UK tonnage tax scheme.
The accountant says that companies who may be adversely
affected should urgently review their financing arrangements
and to eliminate where possible any loans from UK companies
to connected UK tonnage tax companies.
Moore Stephens explains that the UK transfer pricing rules
apply to transactions between a UK company and any other
entity under common control. They apply to transactions
between UK companies, including transactions with UK tonnage
tax companies. They also apply to transactions across the
tonnage tax ring-fence. However, whether or not they apply
will depend on the size of the group.
When tonnage tax was first introduced in 2000, it was realised
that the effect of applying the transfer pricing rules to
transactions involving UK tonnage tax companies could mean
that, where a UK resident group company lends money to a
tonnage tax company, the lender will be taxable on notional
interest receivable with no notional tax deductible interest
payable in the hands of the borrower. So, following representations
by industry at the time, HMRC agreed that, in most cases,
the transfer pricing rules would not be applied in the case
of loans to UK tonnage tax companies.
Now, however, HMRC is withdrawing this informal concessionary
treatment, with effect from 9 December, 2010.
Moore Stephen partner Sue Bill says, “The withdrawal of
this informal concessionary treatment may result in taxation
liabilities arising on taxable notional interest income
in groups, depending on their financing arrangements. This
change will potentially apply to all groups where a UK tax-resident
company has lent money to a UK tonnage tax company, even
where the lender is another UK tonnage tax company.
She added: “The concession for tonnage tax companies was
an important one, so the UK government’s conclusion that
it is now obsolete and to be withdrawn is a blow for those
companies who will be adversely affected. Our information
is that, despite representations made on behalf of the shipping
industry, HMRC intends to proceed with the withdrawal of
the concession with effect from 9 December, 2010. It is
therefore important that groups review their financing arrangements
and identify any loans from UK companies to connected UK
tonnage tax companies. Such loans should be eliminated as
far as possible, and no further such loans be contemplated.
Specific advice should be obtained, and any necessary restructuring
carried out by 9 December this year.”
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Global shipping industry recruiter and Maritime London member
Faststream reports that demand for ship operators and freight
traders remains strong in Europe and Asia. Prospects for
a career chartering in London remain good, but Singapore's
star is rising rapidly.
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| Good shipbrokers are very much in demand |
In its annual Maritime
Employment Review for the commercial shipping market,
group managing director Mark Charman says: “The shipping
markets continue to offer good opportunities for talented
individuals and we believe that as long as there are no
market shocks, the post-Christmas and post-bonus period
should be a busy one for freight traders, shipbrokers and
chartering managers looking for new challenges.”
The review looks at the growth of commercial shipping activity
in Singapore and how this activity is translating into more
and more jobs.
The report finds that mid level chartering managers in
Singapore are commanding average salaries of GBP 72,650
(S$149,500) vs GBP 59,120 ($121,610) in Europe. Mid level
ship operators are being hired on average for GBP 59,900
(S$117,125) in Singapore vs GBP 49,500 (S$121,610) in Europe.
As part of the review, Faststream also surveyed shipbrokers,
chartering managers and freight traders and found that nearly
half felt that London would continue to be the world’s leading
chartering centre in the next ten years and sustain the
number of shipbroking positions it currently does.
The survey also found that Singapore was the most popular
location to move to if the right job opportunity arose,
with 60% of the 85 respondents saying that they would consider
moving there. This was closely followed by London (52%),
Geneva (50%) and New York (45%). Only 28% of respondents
said that they would consider moving to Shanghai.
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The UK government plans to withdraw the four emergency
towing vessels (ETVs) stationed around Britain as part of
the cutbacks announced in the Spending Review 2010. The
future of the Maritime Incident Response Group (MIRG) is
also being reviewed and it may also be scrapped.
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| ETV Anglian Princess, one of four emergency towing
vessels to be withdrawn |
The MIRG – which was launched in 2006 to provide a coordinated
national network of trained personnel to respond to fires,
chemical releases and other accidents at sea – is being
reviewed. Ending the ETV service will save a total of GBP32.5m
over the five-year spending review period while scrapping
MIRG would save a further GBP340,000 a year.
Announcing the details of the cuts, the Department for
Transport said the Maritime & Coastguard Agency would stop
providing the ETVs with effect from September 2011.
Both moves have been criticised by seafarers' union Nautilus
which says that the government is “gambling with the safety
of lives and the environment”.
By coincidence, following the official announcement ETVs
have been involved in two high profile casualties and one
those incidents required UK fire brigade assistance.
Two days after the Review the Royal Navy's newest nuclear
powered submarine, HMS Astute, went aground close to Skye
and was pulled off by the ETV Anglian Prince.
Last week the ETV Anglian Princess assisted the fish factory
vessel Athena when she caught fire off Falmouth and a MIRG
team from Devon and Somerset Fire and Rescue Service boarded
the vessel to tackle the fire but later had to abandon her.
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The European Commission (EC) plans to spend an additional
euros 3.863m over the four years 2012-2015 to push forward
plans for the gradual transformation of the European Maritime
Safety Agency into a European Coastguard Service.
In a scheme intended to boost EMSA's powers and its staffing
levels, increasing annual amounts are to be spent until
an implied continuing extra cost of euros1.249m is reached
in 2015.
A detailed statement released on Friday says: “Following
an invitation by the European Parliament and the Council,
the Commission services are working on a feasibility study
regarding a European Coastguard service. The Commission
services have concluded so far that synergies at EU level
regarding certain coastguard operations could be reinforced
through EMSA's activities. This could be further supported
by extending EMSA's tasks in selected areas, in particular
regarding the monitoring of maritime traffic and shipping
routes as well as assistance to Member States in the tracking
of possible polluters.”
The statement also says EMSA “may act outside the territory
of the EU in its fields of competence” which could be seen
as providing a mechanism to allow EMSA to represent the
EU states at IMO. Equally controversially, but more explicitly,
the statement also says that EMSA should take on a maritime
security role. Much of the more controversial content of
the detailed statement is however missing from an EC press
release announcing the proposed modifications to the EMSA's
mandate which are, it is claimed, intended to enable it
to “deal with new challenges in an ever-changing world”.
Vice-president Siim Kallas, responsible for Transport,
said: "Safety is a cornerstone of the EU transport policy.
The European Maritime Safety Agency was created back in
2004 in response to disasters such as the ones involving
the ferry Estonia or the tankers Erika or Prestige and I
am very pleased to see it today as a well respected player,
providing high value professional services to maritime transport
and beyond. It is now time to update its mandate to allow
it continuing successfully on this path."
The EC says that the proposal for a “limited extension”
of EMSA's tasks reflects new needs. The press release says
EMSA’s updated mandate would:
• clarify that the Stand-by Oil Spill Response Vessels under
contract by EMSA can intervene also in case of oil pollution
caused by offshore installations;
• increase EMSA's involvement in EU research (analysis of
research projects and identification of research priorities);
• extend EMSA's technical assistance to all European Neighbourhood
Policy countries in order to promote the EU maritime safety
policy in all the regional seas bordering the EU;
• emphasise the role of EMSA's operational vessel traffic
monitoring services as basis for extended transport and
maritime information services, including in the context
of the development of a Common Information Sharing Environment
for the EU maritime domain;
• extend EMSA’s assistance in the development and implementation
of EU policies, such as Motorways of the Sea, e-maritime
as well as environmental aspects of shipping including climate
change.
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The UK Chamber of Shipping has announced a range of structural
and financial changes aimed to improve the effectiveness
and efficiency of its work on behalf of its members. Led
by chief executive Angus Frew, the changes are aimed to
equip the Chamber to “continue to deliver valued services
to its members and meet the challenges of the next 10 years”.
A statement says that a key feature of the
review has been the simplification of the work of the Chamber
to focus on lobbying and other supporting activities in
five key areas: taxation and economics; safety and the environment;
employment; defence and security; and legal, insurance and
documentary.
The Chamber highlights its involvement in:
Maritime UK – the coalition and single voice for shipping,
ports and maritime business; Merchant Navy Training Board
– the central body for promoting and developing seafarer
education, training and skills; Sea Vision – the national
campaign to raise awareness and increase understanding of
the sea and the value of the wider maritime sector.
The Chamber’s committee structure will be
based around the five key lobbying areas, with sector panels
for passenger shipping, offshore support and harbour towage
to provide specific input from both a policy and a technical
perspective.
The Chamber secretariat has been reorganised
to reflect the changes in the committee structures. With
the retirements of Edmund Brookes (deputy director-general)
in December 2009 and David Asprey (Director Policy) in October
2010, the Chamber has seen a small reduction in its senior
secretariat team to meet the needs of the new focus in work
streams.
Alongside the structural changes, the restructuring
of the Chamber has returned it to financial stability. The
Chamber says that this has been achieved by a range of measures
including changes to the management of the Chamber’s building
and its conference services, cost savings aligned to the
tighter focus on core activities and headcount reductions
in the administration team.
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London-based international shipping and marine services
provider Braemar Shipping Services has announced that
revenue from continuing operations increased 18% to GBP67.6m
in the six months ended 31 August 2010, compared to the
same period last. Pre-tax profit from continuing operations
increased 3% to GBP7.2m. Basic EPS from operations increased
7% to 25.99p.
Braemar chairman Sir Graham Hearne said: “The gradual
recovery in most shipping markets which began in 2009
continued into 2010 and the financial year began more
positively than expected. Throughout the period under
review our transaction volumes have been consistent and
in some cases improving. Broking revenues were also augmented
by a strong forward order book at the beginning of the
year.”
He added: “Our strategy of steadily expanding the scope
and geographical coverage of our operations evens out
the exposure to particular markets which is beneficial
during periods of volatility. The importance of Asia to
our business cannot be underestimated and we intend to
strengthen our presence significantly in the region. Growth
in Asia is expected to sustain the demand for shipping,
while the supply of new tonnage will tend to suppress
freight rates and vessel values – probably for some time
to come. In this environment we expect to see transaction
numbers rise but at lower average commissions. Part of
our future income arises from the forward order book of
business written which provides a level of security and
predictability. Our prospects for the year as a whole
remain positive.”
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Reinforcing a number of earlier warnings from P&I clubs
on the issue, the American Club has drawn attention to a
newly updated Indian government M Notice highlighting the
dangers associated with cargoes of iron ore fines emanating
from the country’s ports.
The Merchant Shipping Notice No. 9 of 2010
concerns the “Safe loading, stowage, carriage and discharging
of iron ore fines on ships from Indian ports” – in “fair
and foul season”. In a member alert, the American Club’s
managers, Shipowners Claims Bureau Inc, says the notice
sets out the applicable international conventions and the
enabling legislation to incorporate them into Indian law,
and should be read in conjunction with M Notices Nos. 31
and 34 of 2009, which were issued after two serious casualties
in July and September that year. The first was the Asian
Forest, which was followed by many near misses involving
ships carrying this cargo from Indian ports in August.
Another serious incident the next month concerned
the Black Rose. Neither vessel was entered in the American
Club. Both ships were lost, leaving behind more than 1,400
tons of entrapped bunker oil. The ships encountered heavy
listing due to shifting of cargo on account of liquefaction.
Subsequent investigations showed improper cargo information,
excessive moisture content in the cargo, liquefaction, and
refusal of entry by port authorities Although the new M
Notice is of an advisory nature only, the club notes, the
conventions and law referred to should be binding upon all
stakeholders involved in the export of iron ore fines.
The notice includes a new requirement that
port authorities should provide assistance to prevent a
casualty after the shipment of such a cargo and provide
a safe and sheltered place to enable ships to take corrective
measures.
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Maritime London member Steamship Mutual has announced
that it will not to impose a standard increase on either
Class 1 (P&I) or Class 2 (FD&D) entries but that records
would be reviewed and rates assessed in the usual way.
In a statement, the P&I Club reported that there are
no apparent signs of a significant change in the claims
outlook as compared to recent years. However it was noted
that it was still too early to make any accurate assumptions
about the 2010/11 outcome given the considerable potential
for claims in the northern hemisphere winter months. Release
calls were also reviewed by the Club's Directors and these
were reduced to reflect the increased confidence in the
expected outcomes for the open policy years. It was confirmed
that the 2008 policy year would be considered for closure
in May 2011 with a release call of 5%. The release call
for 2010 and the forthcoming 2011 policy years were set
at 20% and 2009 reduced to 15%.
Gary Rynsard, CEO, commented: “We were able to report
to our Board a very encouraging set of figures based on
the increased capitalisation of the Club, its lower risk
investment strategy and continued prudent underwriting
and reserving policies. The Board decided not to impose
a standard increase having considered carefully current
claims trends, underlying churn issues and the capital
requirements likely to be introduced by Solvency II.”
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Two dry cargo chartering courses take place in London this
November. The Baltic Exchange’s Practical
Dry Cargo Chartering course takes place 22-25 November
and covers a range of topics including negotiation, voyage
estimating and post-fixture operations. Maritime London
member Jeffrey Blum is leading a new course run in association
with GAC and the Irish Maritime College on 18-19 November
titled Dry
Cargo Operations & Chartering.
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There was an unintentional typographic error in the headline
for our report in the last issue (21.10.10) concerning comments
made by International Chamber of Shipping Chairman, Spyros
M Polemis. Mr Polemis has no connection with the company
inadvertently named in the headline and we apologise to
him for the error. Equally the company named has made no
comments regarding the issues reported on in the article
and we apologise to them for any confusion caused.
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