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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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PMA: Ships: Attribution of deferred amounts, variation of attribution

CAA01/S140 - S142

When an amount has been deferred the shipowner may attribute all or part of the amount deferred to expenditure on new shipping incurred in the 6 year period beginning with the disposal event for the old ship as has not already been used for an attribution. The shipowner makes the attribution by giving notice to the Inland Revenue. Where the attribution is against expenditure on new shipping incurred by another company the notice attributing the balancing charge to that expenditure has to be given by both companies.

The shipowner or a company that is a member of the same group may acquire more than one new ship in the six-year period during which the balancing charge may be deferred. If so, the balancing charge deferred is attributed to the earliest acquisition.

Example Henry defers a balancing charge of £1,000,000 for the year ended 31 August 2005. He buys a new ship that is a qualifying ship for £750,000 in the year ended 31 August 2007 and another one for £900,000 in the year ended 31 August 2008. £750,000 of the balancing charge is attributed to the ship bought in the year ended 31 August 2007 leaving £250,000 to be attributed to the ship bought in the year ended 31 August 2008.

If more than one balancing charge has been deferred, they must be attributed to expenditure on new shipping in the order in which they arose. That is, a balancing charge arising in an earlier chargeable period must be attributed to new shipping before a balancing charge arising in a later chargeable period.

Example Clark has a deferred balancing charge of £500,000 in the year ended 30 September 2004 and a deferred balancing charge of £400,000 in the year ended 30 September 2006. He buys a new ship for £750,000 in the year ended 30 September 2007, the whole of the deferred balancing charge of £500,000 for the year ended 30 September 2004 is attributed to it. Only £250,000 (= £750,000 - £500,000) of the balancing charge for the year ended 30 September 2006 is attributed to the new ship bought in the year ended 30 September 2007 leaving £150,000 to be deferred against later acquisitions.

When a balancing charge is deferred it is attributed to expenditure on new shipping. The shipowner can vary the attribution by giving notice to the Inland Revenue within the time limit for claiming deferment of the balancing charge.

If the person against whose expenditure the balancing charge was rolled over is not the shipowner any notice to vary the attribution must be given by them jointly.