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HMRC internal manual

Tonnage Tax Manual

Ship leasing: Sale and lease-back

A lessor is not entitled to any capital allowances (by virtue of FA00/SCH22/PARA92 (1)) in respect of capital expenditure incurred on a qualifying ship that is provided to a tonnage tax company under a ‘sale and lease-back’ arrangement.

Meaning of ‘sale and lease-back’

An arrangement is a ‘sale and lease-back’ for this purpose if:

  1. A qualifying ship is owned by a tonnage tax company (or would be treated as such under CAA01/PART2) and used for the purposes of its tonnage tax trade, and then
  2. A transaction takes place as a result of which the finance lessor would ordinarily have become entitled to capital allowances in respect of his expenditure on the ship, and
  3. Following that transaction, the ship is used for the purposes of the tonnage tax trade of the tonnage tax company that used to own it (or of another tonnage tax company in the same group), without being used in the meantime for the purposes of any other trade (aside from leasing).

Exception for new ships

There is an exception to the general rule on sale and lease-back in the case of a new ship, (see TTM10210).


FA00/SCH22/PARA92 (sale and lease-back arrangements) TTM17536