Ship tax change boost for P&O

JOHN PRESCOTT, the Deputy Prime Minister and a former merchant seaman, yesterday displayed uncharacteristic benevolence towards one of Lady Thatcher's most fervent supporters when he announced a new system for taxing ships on tonnage rather than corporate pre-tax profits.

Lord Sterling, a former industrial adviser to Lady Thatcher's government and now chairman of the UK's biggest quoted shipping firm, could see a 10 per cent boost in Peninsular & Oriental Steam Navigation's share price after analysts said the new rules could raise earnings by more than 10 per cent a year.

Lord Sterling welcomed the news. "This is the biggest boost to our shipping industry in the last 20 years and makes the UK competitive again in world terms," he said. Analysts say P&O's tax charges will be reduced to 15 per cent from 22 per cent when the new system is introduced on 1 January 2000.

P&O said the tonnage tax would be more clear and flexible than conventional corporate tax. Companies can be sure a major liability will not arise and can plan and finance capital expenditure without making provision for deferred taxation.

The new rules will also have a positive impact on UK jobs; P&O has said it will register 50 extra ships in the country, including the world's biggest cruise ship, Grand Princess. The move will double the number of P&0 UK-based cruise ships, ferries, container ships and bulk carriers. The company has 260 chartered and leased ships.

P&O said: "The UK will become the base for more of our international strategic and operational management. We will place more purchasing and equipment orders here and carry out more refits here."

The tonnage tax will carry with it an obligation on companies to train enough seafarers to meet future requirements.

P&O's shares closed up 3.04 per cent at 966p, from 937.5p.

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