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HMRC internal manual

Capital Gains Manual

Europe: fishing vessel decommissioning grants: introduction

This guidance tells you about the Capital Gains Tax treatment of various grants payable to the owners of fishing vessels.

You will find instructions on how to deal with such grants as trading receipts in BIM57001.

This guidance includes limited information on the 1983 and 1993 schemes. For any later schemes the same principles should be applied for capital gains purposes.

The 1983 scheme: The first scheme involving the payment of grants was introduced on 21 December 1983. Under it, a decommissioning grant was payable when a fishing vessel was either

  • scrapped


  • permanently transferred to a country outside the EC


  • transferred to use for a purpose other than fishing for profit in EC waters.

Where a vessel was sold, scrapped or permanently ceased to be used for the purposes of the trade, the grant was normally taken into account in computing any balancing charge or allowance. BIM57001 tells you about this.

The full amount of the grant was also treated as chargeable to Capital Gains Tax. This was in addition to any sale or other disposal proceeds, TCGA92/S37 (2). As the allowable expenditure, TCGA92/S38, would have included the costs of acquisition and any improvement expenditure on the vessel where these were incurred by the person entitled to the grant, the result was that you only charged Capital Gains Tax on any excess grant over that allowable expenditure.

Exceptionally, where the vessel qualified for a decommissioning grant but continued to be used in the same trade, the grant was taxable as a trading receipt.

These grants were treated as taxable trading receipts. BIM57001 tells you about them.

These grants were normally treated as trading receipts. BIM57001 tells you about them.

The taxation treatment of these grants depended on the particular circumstances of the case. BIM57001 tells you what to do if you are dealing with a case involving this type of grant.

The 1993 scheme:

Grants under the new scheme were payable by 1 April 1994.

To qualify for a decommissioning grant under this scheme, the following three conditions must ALL be satisfied

  • the vessel must be scrapped - this means permanently broken up or otherwise permanently disabled so that it is incapable of use for any seagoing purpose


  • it must be deregistered


  • any fishing licences held in respect of it must all be surrendered.

MAFF would normally pay a global sum which might include

  • consideration for the vessel
  • a contribution towards the cost of scrapping the vessel
  • consideration for the surrender of the fishing licences.

In any case where it is necessary to apportion any grant for Capital Gains Tax purposes, you should do this on a just and reasonable basis, TCGA92/S52 (4).

BIM57001 tells you that the parts of the grant relating to the vessel itself and the costs of scrapping it are brought into the Capital Allowances computation. Any excess is then chargeable to Capital Gains Tax. You will find detailed instructions on dealing with this type of case in CG15400+.

Any part of a grant which relates to the fishing licences will be chargeable to Capital Gains Tax.