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HMRC internal manual

Tonnage Tax Manual

Ship leasing: Quantitative restrictions on allowances


There are special rules to deal with the treatment of disposal proceeds received by a lessor in cases where the allowances available in respect of the cost of a ship were subject to the quantitative restrictions described in TTM10400.

Any disposal proceeds of such a ship should be deducted from the lessor’s 18 per cent and 8 per cent pools in the same proportion as the cost of providing that ship was taken to those pools.

Because the expenditure in the 18 per cent pool is written off faster than the expenditure in the 8 per cent pool, it could be that the disposal proceeds taken to the 18 per cent pool exceed the expenditure remaining in it, whilst there is still unrelieved expenditure remaining in the 8 per cent pool.

Any excess of disposal proceeds from the 18 per cent pool does not immediately give rise to a balancing charge.  That excess is instead first deducted from the 8 per cent pool.

A balancing charge only arises if the amount(s) taken to the 8 per cent pool (directly or indirectly) exceed the unrelieved expenditure remaining in it.


An example of how to treat disposal proceeds is at TTM10460.


FA00/SCH22/PARA97 (treatment of disposal proceeds) TTM17561