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HMRC internal manual

Tonnage Tax Manual

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HM Revenue & Customs
Updated
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Capital allowances: Exit from tonnage tax (P&M)

Qualifying expenditure: Long-life assets

Long-life assets are those which may reasonably be expected to have a useful economic life of at least 25 years when new.  Ships were excluded from the long-life asset legislation until 31 December 2010.

Expenditure on long-life assets is written down in the special rate pool.  See CA23700 onwards.  From 6 April 2012 the rate is 8 per cent on reducing balance basis.

The qualifying expenditure that should go into a company’s special rate pool in respect of long-life items of machinery or plant is a percentage of the original cost of the asset.

The percentage varies according to length of time that the company owned the asset before leaving the tonnage tax regime, as follows:

Length of period of ownership to date of exit Percentage of original cost to go into capital allowance pool
   
Less than or equal to 1 year 94
From 1 year and one day to 2 years 88
From 2 years and one day to 3 years 83
From 3 years and one day to 4 years 78
From 4 years and one day to 5 years 73
From 5 years and one day to 6 years 69
From 6 years and one day to 7 years 65
From 7 years and one day to 8 years 61
From 8 years and one day to 9 years 57
From 9 years and one day to 10 years 54
From 10 years and one day to 11 years 51
From 11 years and one day to 13 years 47
From 13 years and one day to 16 years 40
From 16 years and one day to 19 years 33
From 19 years and one day to 22 years 27
From 22 years and one day to 25 years 23
From 25 years and one day to 30 years 18
From 30 years and one day to 35 years 13
From 35 years and one day to 40 years 10
From 40 years and one day to 45 years 7
From 45 years and one day to 50 years 5
From 50 years and one day to 60 years 3
From 60 years and one day to 70 years 2
More than 70 years Nil

References

FA00/SCH22/PARA85 (exit: plant & machinery) TTM17466
   
SI00/2303/REG6 (writing-down basis of long-life assets) TTM18006
Qualifying expenditure on exit from tonnage tax TTM09300