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HMRC internal manual

Tonnage Tax Manual

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HM Revenue & Customs
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Capital allowances: Balancing charges (P&M)

Procedure on deferred balancing charge

A balancing charge deferred under FA00/SCH22/PARA80 (see TTM09230) is not dealt with as a deferred balancing charge under CAA01/S135.
 

Under those normal rules, see CA25400, the balancing charge will not be brought into account in the corporation tax computations if a claim for deferral is made for that period. And there are procedures for recovering the balancing charge if a replacement ship is not acquired

Under the tonnage tax rules, paragraph 80 only allows a claim to be made if:
 

  • a balancing charge arises

and

  • within the relevant period capital expenditure is incurred on a qualifying ship, (see TTM09230).

Thus, in order to make a claim the company must have already acquired the replacementship(s).

Example 1

A tonnage tax company, with an accounting period year ended 31 December 2013, makes a balancing charge on disposal of a ship on 30 November 2013, and acquires a new ship (of sufficient value) on 31 August 2014, then

  • it makes a claim for deferral of the balancing charge in its self-assessment return for AP year ended 31 December 2013 (filed in October 2014), and
  • the balancing charge will not be included in its returned profits, and remains ‘held over’ against the new ship.

 

  • A record is needed to ensure that the charge is reinstated for the AP year ended    31 December 2013 should the new ship be sold within the 7-year period of entering tonnage tax (see TTM09230).

Example 2

As for Example 1, but the company does not acquire a new ship until 31 October 2015 (within the time limit expiring on 30 November 2015), then:

  • in its computations for the AP year ended 31 December 2013, with filing date of 31 December 2014, it must include the balancing charge (and pay tax on it), and
  • claim relief after 31 October 2015 (4 year time limit – see CTM 90610) in respect of its acquisition of a new ship, and submit an amended return (see CTM93300) for AP year ended 31 December 2013.

A record is needed to ensure that the charge is reinstated for the AP year ended    31 December 2013 should the new ship be sold within the 7-year period after entering tonnage tax(see TTM09230).

References

Deferment of balancing charge arising after entry TTM09230