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HMRC internal manual

Tonnage Tax Manual

Capital allowances: Entry into tonnage tax (P&M):

Tonnage tax pool (‘frozen pool’)

Unrelieved qualifying expenditure on wholly-used assets

When a company enters tonnage tax any unrelieved qualifying expenditure attributable to plant or machinery that is to be used wholly for the purposes of the company’s tonnage tax trade is taken to a single pool, per FA00/SCH22/PARA69 (1).  This pool is referred to in the legislation as the ‘tonnage tax pool’, and is also referred to informally as the ‘frozen pool’, see see TTM09020.

Unrelieved qualifying expenditure in mixed-use pool

Expenditure in a pool where only some of the assets are to be used for tonnage tax is apportioned in accordance with PARA69 (3), see TTM09030.

Unrelieved qualifying expenditure on partly-used assets

Any unrelieved qualifying expenditure attributable to plant or machinery that is to be used partly for the purposes of the company’s tonnage tax trade, and partly for another purpose, is not to be taken to the tonnage tax pool, per PARA70, see TTM09040.

Unrelieved qualifying expenditure on non-tonnage tax assets

Expenditure on non-tonnage tax assets will of course be excluded by PARA69. Also excluded would be free depreciation where the ship was not qualifying, and was not therefore a tonnage tax asset. The residual pool of such expenditure continues to be available under the ordinary capital allowance rules in arriving at the trading profit or loss.

Expenditure on tonnage tax assets

Expenditure on new assets (or on assets newly brought into use) by a tonnage tax company for the purposes of its tonnage tax trade is not added to the tonnage tax pool, by virtue of paragraph 74.

Transfers of ships within a tonnage tax group

CTA10/S940A (company reconstructions without a change in ownership) can apply to transfers of shipping trade between members of the same tonnage tax group.  Where a shipping business is transferred between members of a tonnage tax group in such circumstances that CTA10/S940A would normally apply, the tonnage tax pool relating to that shipping business may be transferred along with the shipping business itself to the new owner.

One member of a tonnage tax group may own a ship which it bareboat charters to another member of the same group. HMRC will accept that this is a trade for the purposes of CTA10/S940A.  If the ship (still subject to the bareboat charter) is transferred to a third company within the group, the tonnage tax pool relating to that ship may also be transferred to the third group company.

Use of frozen pool

No allowance may be claimed in respect of any expenditure taken to the frozen pool, even on leaving tonnage tax.

However, PARA77 provides that the proceeds from the disposal of assets held at the date of entry may need to be deducted from the balance in the pool to determine whether a balancing charge arises, see TTM09150.


FA00/SCH22/PARA69 (tonnage tax pool) TTM17386
FA00/SCH22/PARA70 (asset used partly for tonnage tax trade) TTM17391
FA00/SCH22/PARA74 (tonnage tax asset beginning to be used) TTM17411
FA00/SCH22/PARA77 (disposals of tonnage tax asset) TTM17426