(Updates with further detail, comment)
By Jonathan Saul
LONDON, Jan 22 (Reuters) - British ferry and shipping freight operator P&O will shift the registration of its UK vessels to Cyprus ahead of Britain’s departure from the European Union, in part to keep its tax arrangements in the bloc, the company said on Tuesday.
P&O currently has six UK-registered ships operating on the English Channel route to France, although it announced last month it was moving two of those to the Cyprus registry and one has already been transferred.
All commercial ships have to be registered, or flagged, with a country partly to comply with safety and environmental regulations.
The move could complicate any attempts by the UK government to secure extra space on ships to help cope with potential disruption to trade if it fails to secure a negotiated departure from the EU.
“In advance of Britain leaving the European Union on March 29, 2019, we undertook a review of the flag status of our ships on the English Channel,” a P&O spokesman said in a statement.
“For operational and accounting reasons, we have concluded that the best course of action is to re-flag all ships to be under the Cyprus flag.”
The spokesman said Cyprus was among the world’s leading flag registries, “resulting in fewer inspections and delays”.
He added the move “will result in significantly more favourable tonnage tax arrangements as the ships will be flagged in an EU member state”.
“We have no plans to make any other changes, including the terms and conditions of any of our seafarers, as a result of the new arrangements.”
Such a taxation system like the EU’s allows shipping companies to pay corporation tax based on the tonnage of their vessels rather than on profit.
Industry sources told Reuters in December that the UK government had made approaches to companies including P&O, to secure back-up vessels in case Britain failed to secure a negotiated withdrawal from the EU.
Since then, Britain has awarded contracts worth more than 100 million pounds ($129 million) in total to three shipping firms to provide extra ferries, comprising French firm Brittany Ferries, Denmark’s DFDS and a new British company Seaborne Freight.
The government has faced criticism from opposition politicians over awarding a contract to Seaborne Freight, which they said had no ships and highlighted the rush to secure ships to avoid disruptions at major ports.
When asked on Tuesday if P&O could provide space on ships if needed by the government, the company declined to comment.
$1 = 0.7744 pounds Editing by Louise Heavens and Mark Potter