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HMRC internal manual

Tonnage Tax Manual

Chargeable Gains: Time apportionment


1.1 2001 A Ltd elects into tonnage tax.
1.1.2005 A Ltd buys a building used exclusively for its tonnage tax trade from a 3rd party
1.1.2008 A Ltd sells the building to its parent company B Ltd. B Ltd has no qualifying activities and so uses the building for non tonnage tax purposes.
1.1.2012 B Ltd sells the building to a 3rd party, giving rise to a potential chargeable gain of £7,000

The disposal by A Ltd to B Ltd is an intra-group transfer covered by the normal no gain/no loss provisions, and so it is disregarded for the purpose of applying the time apportionment provisions.

The last ‘third party disposal’ of the building is the disposal by the original owner to A Ltd on 1/1/2005.  Therefore P = 7 years

The building is a tonnage tax asset during the period it was owned by A Ltd, but it was not a tonnage tax asset during the period it was owned by B Ltd. Therefore PTTA = 3 years.The time apportionment formula applies to reduce Company B’s chargeable gain as follows:


(P - PTTA) ÷ P x gain =  
(7 - 3) ÷ 7 x £7,000 = £4,000



B’s chargeable gain on the disposal of the building is £4,000 before taking into account any capital losses brought forward, any capital losses arising in the period, or any claims to rollover relief.



Outline of time apportionment TTM08200