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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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PMA: Ships: Meaning of qualifying ship

CAA01/S151 - S154

A balancing charge can only be deferred if it arises on a qualifying ship. A ship is a qualifying ship if it is a ship of a seagoing-kind registered in a shipping register as a ship with a gross tonnage of 100 tons or more.

The 100 tons gross tonnage requirement does not apply when the disposal event causing the balancing charge is the total loss of the ship or damage which puts it in a condition where it is impossible, or not commercially worthwhile, to repair it. In such cases there is no weight restriction.

Example Pedro is a fisherman who has a fishing boat with a gross tonnage of 50 tons. The fishing boat sinks. It is a qualifying ship even though its gross tonnage is less than 100 tons because it has been totally lost. This means that if the insurance proceeds create a balancing charge it can be deferred. If, however, Pedro had sold the fishing boat it would not have been a qualifying ship and so any balancing charge arising from the sale could not be deferred.

A ship is not a qualifying ship if:

  • it is of a type primarily used for sport or recreation by the owner or people to whom it is made available, or
  • it is an offshore installation for the purposes of the Mineral Workings (Offshore Installations) Act 1971, or would be if the activity for which it is being used were being carried out in controlled waters; this covers things like oilrigs and gas installations.
  • it is not registered in a relevant register within three months of the start of the qualifying period by the shipowner or a person connected with the shipowner.


The qualifying period is:

  • the period of 3 years that begins when the ship was first brought into use for the purposes of a qualifying activity of the shipowner or, without having been brought into use by the shipowner, for the purposes of a qualifying activity of a person connected with the shipowner, or
  • if shorter, the period beginning then and ending when the ship ceases to belong to the shipowner or any person connected with the shipowner.


This means that the qualifying period can never last for more than three years.

Example Jesse and Frank are brothers. Jesse buys a ship on 1 September 2006. Jesse does not bring the ship into use and transfers it to Frank on 1 December 2006. If Frank brings the ship into use on 1 July 2007 the qualifying period begins on 1 July 2007. It ends on 1 July 2010 provided that Frank still owns the ship on that date. If Frank sells the ship before, then the qualifying period ends when Frank sells the ship.

A relevant register is any register of shipping established and maintained:

  • under the law of any part of the British Islands (the United Kingdom, the Channel Islands and the Isle of Man), or
  • under the laws of any country or territory which during the qualifying period is an EEA State or a colony.


The countries that are colonies are Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Falkland Islands, Gibraltar, Montserrat, St Helena, Turks & Caicos Islands.