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HMRC internal manual

Tonnage Tax Manual

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

Ships bought and sold within 12 months

There is a restriction on the capital allowances available on expenditure on a ship that is

  • acquired within the final 6 months before a company enters the regime


  • disposed of within a year of acquisition.

In such a case, the total capital allowances available are limited to the excess of expenditure incurred over the market value of the ship as at the date the company entered the regime.


SCJ Shipping Ltd buys a cruise liner, the Crowning Glory, on 1 August 2009 for £200 million.

SCJ Shipping Ltd elects into Tonnage Tax from 1 January 2010.

The *Crowning Glory *is worth £180 million on entry into Tonnage Tax.

On 31 March 2010 the *Crowning Glory *is sold for £160 million.

The capital allowances available to SCJ shipping Ltd for the period to 31 December 2009 in respect of the *Crowning Glory *are limited to:

£200 million - £180 million = £20 million.


FA00/SCH22/PARA71 (ships acquired and disposed of with 12 months) TTM17396