TTM10410 - Ship leasing: Quantitative restrictions on allowances

Entitlement to allowances

For expenditure incurred on or after 1 January 2011, a lessor will be able to claim writing down allowances at the applicable rate (most likely to be 6 per cent as ordinarily ships would be assessed as long life assets acquired with special rate expenditure, see CAA01/S104A (1)(c) and S104D (1)), on the first £40 million of expenditure, and at 6 per cent on the second £40 million, see FA00/SCH22/PARA94 (3)(b), which also applies the CAA01/S104D (1) rate.

The applicable rate for a ship that is not a long life asset is as follows:

  • No first year allowances;
  • Writing-down allowance of 18 per cent a year on the first £40 million (the normal rate specified at CAA01/S56 (1), see FAA00/SCH22/PARA94 (3A)(a));
  • Writing-down allowance of 6 per cent a year (the rate specified by CAA01/S104D) on the next £40 million;
  • No allowances on any excess over £80 million.

These limits apply separately to each ship, FA00/SCH22/PARA95 (1).

Historic rates were as follows:

Expenditure incurred Writing-down allowance on first £40m Writing -down allowance on next £40m Writing-down allowance on any excess over £80m
Before 1 April 2012 Nil Nil Nil
1 April 2012 to 31 March 2019 18% 8% 8%
From 1 April 2019 18% 6% 6%

Hybrid rate

Where a business’s chargeable period spans the date the WDA rate is changed, a hybrid rate is used to calcuate the rate of WDA for that transitional period - see CA23220 for more details on how to calculate the WDA rates for such periods.

Separate class pools

The expenditure that does qualify for allowances should be taken to separate 18 per cent and 8 per cent class pools. Expenditure on each qualifying ship should be allocated to the 18 per cent class pool, or the 8 per cent class pool, as appropriate.

References

FA00/SCH22/PARA94 (quantitative restrictions on allowances) TTM17546
FA00/SCH22/PARA95(1) (limits apply to cost of each ship) TTM17551
Quantitative restrictions on allowances TTM10400
Shared expenditure on ship TTM10420
Cost of providing ship TTM10430
Example of cost of providing ship and the quantitative restrictions TTM10440