Bermuda's shipping chief has warned he fears ships registered on the Island will start moving to Britain as a result of a new initiative announced by the United Kingdom government.

Captain Pat Nawaratne, the Principal Marine Surveyor at the Registry of Shipping in Bermuda, said if vessels begin to transfer to the London register, Bermuda's Ministry of Finance will lose money.

Government currently earns around $1 million a year from the 130 ships registered in Bermuda, which each pay between $3,000 and $25,000 a year based on tonnage.

In an exclusive interview with The Royal Gazette Capt. Nawaratne spoke out to appeal to the owners of the Bermuda-registered ships to take time to carefully study the British Ministry of Transport proposals before deciding whether to desert the Island.

The Bermuda registry is expecting to lose ships to London as a result of a tax change announced by the British Transport Minister John Prescott last month, which is designed to revive the ailing UK shipping fleet.

Under the plans, which will come into effect on January 1, all shipping companies based in the UK will be able to pay the British Chancellor of the Exchequer a tax based on ship tonnage rather than a corporation tax based on earnings.

Over the past 20 years, hundreds of companies based in Britain have registered their ships in British offshore dependencies such as Bermuda, the British Virgin Islands, the Cayman Islands and Jersey because of favourable business conditions such as low tax.

They include leading companies such as P&O, which registered passenger ships, tankers and bulk carriers here, and BP which has signed up a number of tankers to the registry.

The announcement that Britain will come into line with most of the rest of the international shipping world by introducing a tonnage tax, such as that in Bermuda, is expected to result in large numbers of ships registered on offshore territories re-joining the British register.

The exact tonnage rate will not be announced until the Budget in November, but early indications are that it will be lower than that of Bermuda.

Ships are required to register in a jurisdiction to receive annual certifications and checks which allow them to trade internationally.

Capt. Nawaratne said yesterday: "The tonnage tax is good for ships on the British register but it could have an adverse affect on offshore British registers such as Bermuda.

"Ships could transfer from this register to the UK and we would lose ship numbers, and there would be less money coming into the Ministry of Finance.

"We are taking a wait-and-see attitude. We want to put ship owners at their ease and not to panic them because it all has to be studied properly.'' He said there was no need for vessels owned by British companies but registered in Bermuda to transfer to the London register.

He explained that under the plans, British-owned ships registered in Bermuda could continue to pay tonnage rates in Bermuda but the corporate tax they paid to the UK government would only be around 10 per cent of that they currently pay.

Although remaining in Bermuda would cost them more, he said, the efficient service would be worth the extra cost.

"There is no necessity for vessels to go back to Britain to obtain the benefits of being based in the UK,'' he continued.

"This is an attempt by the UK to come to terms with the realities of international shipping and an attempt to recover their fleet. We don't knock them for doing that but it will have an affect on us, although it is good for British shipping as a whole.''