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HMRC internal manual

Tonnage Tax Manual

Capital allowances; Exit from Tonnage Tax (P&M)

Qualifying expenditure: General

For periods after it leaves tonnage tax, a company will want to claim capital allowances on its machinery and plant in the normal way based on qualifying expenditure.

There are special rules to determine the qualifying expenditure in the company’s capital allowance pools for its first accounting period following exit from tonnage tax.

The broad thrust behind these rules is that the company should be put in more or less the same position as a similar company which remained outside the tonnage tax regime and claimed the full amount of capital allowances available on all qualifying expenditure, as and when incurred.

For companies leaving after 7 April 2005 on the expiry of an election or the taking effect of a withdrawal notice the exit rules are amended as detailed in TTM14080.

Allocation to pools

Expenditure on items of machinery or plant that were formerly tonnage tax assets should go into whichever pool they would be allocated to by reference to normal capital allowances rules so, for example:

  • ordinary plant and machinery, other than ships, expensive cars and long-life assets, would go into a general pool, and
  • a ship would go into a single ship pool under CAA01/S127, unless notice were given under CAA01/S129 to put the expenditure into the general pool. The default option of the single ship pool would apply whether or not the ship had been in a single ship pool or in a general pool prior to entering Tonnage Tax.

Establishment of unrelieved qualifying expenditure

However, the amount of unrelieved qualifying expenditure to go into the pool(s) for the purpose of calculating future entitlement to capital allowances is neither original cost nor market value of the asset, but an amount determined under the regulations as follows:

  • Plant and machinery (excluding expensive cars and long life assets): TTM09310
  • Expensive cars: TTM09320
  • Long-life Assets: TTM09330


FA00/SCH22/PARA85 (exit: plant & machinery) TTM17466
SI00/2303/REG4 (writing-down basis of plant & machinery) TTM18004
SI00/2303/REG5 (writing-down basis of expensive motor cars) TTM18005
SI00/2303/REG6 (writing-down basis of long-life assets) TTM18006