TTM03595 - Qualifying companies and ships: Sea - meaning of
Source: gov.uk (2025-12-03)


To qualify for tonnage tax, the ship must be operating at sea – see FA00/SCH22/PARA19 (1), amended by FA05. It must not fall into one of the excluded categories of vessel – see .

Sea does not include:
- a port or harbour
- an estuary, a tidal or other river or an inland waterway.
Apart from these exclusions sea is not defined by tonnage tax legislation and neither are harbour, estuary etc. The words should be given their normal meaning in context.

In considering whether a particular stretch of water is ‘sea’ for the purposes of paragraph 19(1), HMRC will consider all relevant factors including
- whether the waters are classed as ‘sea’ for the purposes of the relevant local legislation on merchant shipping, and
- whether a ship needs to be certified as seagoing to operate in those waters.
Neither of these factors will necessarily be conclusive, for example where the local definitions of sea have been designed for a specific purpose and so produce an anomalous result if applied for the purposes of tonnage tax. Generally, though, such local definitions are considered to be helpful and reliable.

UK Waters

For UK territorial waters, the Maritime and Coastguard Agency (MCA) categorises waters that are not regarded as ‘sea’ for the purposes of Merchant Shipping legislation (excepting marine pollution). The MCA is also the competent authority for certification of ships for navigation at sea. The MCA regards waters in category A, B, C and D as not being ‘sea’. HMRC adopts this view for the purposes of PARA19 (1)(a) to (d).

For sheltered foreign waters see TTM03530 (https://www.gov.uk/hmrc-internal-manuals/tonnage-tax-manual/ttm03530).

Estuaries

HMRC consider that an estuary can normally be defined by reference to its ordinary dictionary definition:
- the tidal mouth of a large river, or
- the wide lower tidal part of a river, or
- an arm of the sea that extends inland to meet at the mouth of a river.
The seaward limit of an estuary is not defined in statute but is generally taken to be where the mingling of sea and fresh water begins. Mud banks, shoals and other topographical features may also be indicative. The First-tier Tribunal in Western Ferries v HMRC [2011] UKFTT 243 took this approach but also took into account some other geographical features which were particular to the estuary area they were considering in order to determine its limits.

If such data are not readily available, it is helpful to refer (in relation to a UK estuary) to the Merchant Shipping Notice MSN 1719(M) of the MCA. This Notice defines waters in Category C as:

Tidal rivers and estuaries and large, deep, lakes and lochs where the significant wave height could not be expected to exceed 1.2 metres at any time.

It defines Category D waters as:

Tidal rivers and estuaries where the significant wave height could not be expected to exceed 2.0 metres at any time.

HMRC takes the view that any waters in MCA Category C or D are either estuaries or tidal rivers or lakes. Any ferry operating in these waters is considered to be excluded from tonnage tax under FA00/SCH22/PARA20 (1).

Harbour

A harbour is a refuge or shelter for shipping. It may be a natural harbour or man-made. Used in its ordinary sense it has been recognised by the courts as meaning 'a place to shelter ships from the violence of the sea, and where ships are brought for commercial purposes to load and unload goods'. There is a similar, useful, definition of ‘harbour’ at section 313 of the Maritime Shipping Act 1995, which includes estuaries, navigable rivers, piers, jetties and other works in or at which ships can obtain shelter or ship and unship goods or passengers.

These definitions are helpful in determining what is a harbour for tonnage tax purposes.

There are in the UK a number of statutory harbour authorities, which are responsible for the management and running of a harbour. The geographical extent of their powers will be a relevant but not necessarily conclusive factor. Each case will be judged on its own facts and merits.

These definitions and harbour authority boundaries will also be relevant to determining the limits of harbours overseas.

Where the extent of harbour authority becomes contentious, the Tonnage Tax Technical Adviser should be consulted.