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|