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HMRC internal manual

Capital Allowances Manual

PMA: Ships: Amount taken into account in respect of old ship

CAA01/S139

This is the amount taken into account in respect of the old ship.

If the old ship is in a single ship pool, the amount taken into account is the disposal brought to account less the balance in the single ship pool transferred to the general pool. Effectively this is the balancing charge that would have arisen in the single ship pool.

If the shipowner has transferred all or part of the expenditure on the old ship out of the single ship pool CA25150 the expenditure on the old ship will have merged with the other expenditure in the pool to which the expenditure was transferred. Any balancing charge that arises cannot be precisely attributed to the ship. In that case this is how you calculate the amount taken into account in respect of the old ship.

Assume that the old ship is the only asset in the main pool and has always been and that all the allowances available (both first year, if any, and writing-down) have been claimed. Effectively, you calculate the maximum allowances that would have been given if the ship had stayed in its single ship pool. This gives you a notional figure for the pool brought forward when the disposal event happens. You then calculate what the balancing charge would have been on the basis of those assumptions and that is the amount taken into account in respect of the old ship.

After the amount taken into account in respect of the old ship has been calculated on the basis that it is having single ship treatment the shipowner may give notice that single ship qualifying activity treatment of the old ship is to end. In that case the amount taken into account to the old ship is recalculated on the basis that single ship qualifying activity treatment does not apply to it. The recalculated amount taken into account is not necessarily the same as the amount taken into account already calculated because the shipowner may not have claimed all the allowances available. The recalculated amount may be higher. The single ship pool calculation takes account of the allowances actually claimed. The recalculation takes account of the allowances that could have been claimed.

Example Keiron buys a ship for £1,000,000 in his accounts year ended 24 May 2004. He does not claim any allowances on the ship in the year ended 24 May 2004. He claims a WDA of £250,000 in the year ended 24 May 2005. He sells the ship for £950,000 on 4 July 2005.

The balance in the single ship pool on 25 May 2005 is £750,000 (cost £1,000,000 less WDA £250,000). The amount taken into account in respect of the ship is £200,000 (disposal value £950,000 less pool balance £750,000). On 1 December 2005 Keiron makes an election to keep the expenditure on the ship out of the single ship pool. The amount taken into account in respect of the ship is recalculated like this. Assume that the FYA of 40% available for the year ended 24 May 2004 was taken as was a WDA of £150,000 for the year ended 24 May 2005. This makes the balance in the pool at 25 May 2005 £450,000 and the amount taken into account in respect of the ship £500,000 (disposal value £950,000 less pool balance £450,000).