TTM09340 - 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).
Example
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 |