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HMRC internal manual

Capital Allowances Manual

PMA: Ships: Conditions for and effect of deferment

CAA01/S135 - S137

These are the conditions that have to be satisfied for a balancing charge on a ship to be deferred (rolled over):

  • There is a balancing charge for a chargeable period.
  • There is a disposal event in respect of a ship (the old ship) in the chargeable period.
  • The old ship was a qualifying ship immediately before the disposal event.
  • The disposal event is an event within CAA01/S61 (1)(a) to (d) (cessation of belonging, permanent loss of possession, abandonment, or ceasing to exist) CA23240.
  • The old ship was provided for the purposes of a qualifying activity carried on by the shipowner, and was owned by the shipowner at some time in the chargeable period.
  • The old ship was not leased in such a way that the overseas leasing legislation applies CA24200.
  • The old ship was not leased where the leasing was special leasing CA20040.
  • The old ship was not used partly for purposes other than those of the qualifying activity CA27000, and no subsidies were received towards its partial depreciation CA27100.
  • The ship owner has not made a loss for the chargeable period.


If all of the above conditions are satisfied the shipowner can claim to have the balancing charge, which would be made as a result of the disposal event, deferred. The amount deferred will not necessarily be the whole balancing charge.

These are the time limits for making a claim:

  • Income tax - on or before the first anniversary of 31 January following the year of assessment in which the chargeable period for which the shipowner is liable to the balancing charge ends.
  • Corporation tax - the time limit given by FA98/SCH18 Part IX for making a claim for an allowance CA11140.


When a claim for deferment is made the disposal proceeds are deducted from the pool in the normal way but the amount deferred is added to the shipowner’s qualifying expenditure for that pool for the same period. This cancels out all or part of the balancing charge. The amount deferred is treated as a disposal value in the single ship pool for the new ship to which it is attributed. Treating the balancing charge deferred as a disposal value in the single ship pool for the new ship reduces the expenditure qualifying for capital allowances and so the capital allowances given. The deferred balancing charge on the old ship is collected through the reduction in the capital allowances on the new ship. Since the expenditure incurred on the new ship has not been reduced that is the figure that you use for things like the CAA01/S62 (1) limit on disposal value CA23250.