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HMRC internal manual

Tonnage Tax Manual

Capital allowances: Capital allowances after exiting from tonnage tax

After the written down value of qualifying expenditure has been restored in accordance with SI00/2303/REG4 to REG6, capital allowances are computed in the normal way.

Where a former tonnage tax asset is sold then a balancing adjustment may arise. If this results in a balancing charge, then the cap on disposal value in computing that charge is the original actual cost (or market value, if appropriate), and not the restored post-tonnage tax qualifying expenditure, per CAA01/S62 (1).


Assuming a single ship as the asset; AP year ended 31st December:

01 January 2009 Cost of ship 20,000,000
y/e 31 December 2006 WDA 5,000,000
01 January 2010 Entry into tonnage tax and ‘frozen pool * * *15,000,000

  31 December 2013 Leaves tonnage tax. Qualifying expenditure restored by  
reg4:-  20,000,000 x 25% 5,000,000    
  31 December 2013 Sale price of ship 6,000,000
  y/e 31 December 2013 Balancing charge 1,000,000


FA00/SCH22/PARA85 (exit: plant & machinery) TTM17466
SI00/2303/REG4 (writing-down basis of plant & machinery) TTM18004
Qualifying expenditure on exit from tonnage tax TTM09300