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HMRC internal manual

Tonnage Tax Manual

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Ship Leasing: Quantitative restrictions on allowances

Disposals: Example

A large ro-ro ship (a long life asset for CA purposes) is acquired for £100m on         1 January 2012 by cross-Channel operator, Victory Ferries Ltd, by way of a lease from their bank.  Victory Ferries Ltd has elected for Tonnage Tax with effect from     1 January 2000.

The bank’s leasing subsidiary, Firth Ship Leasing Ltd, claims capital allowances for the year ended 31/12/2012 and for year ended 31/12/2013.

The ship is sold by Victory Ferries Ltd, as agent for Firth Ship Leasing Ltd, for £90m on 1/5/2014.

The capital allowances available to Firth Ship Leasing Ltd are as follows (amounts in £’000s):

Accounting period ended 31 December 2012

  8% pool 8% pool Non-qualifying Total allowances        
                 
Cost (100,000) 40,000   40,000   20,000      
WDA 3,200              

    3,200

        6,400  
  Balance c/fwd 36,800      

    36,800

           

Accounting period ended 31 December 2013

  8% pool 8% pool Non-qualifying Total allowances        
                 
Balance b/fwd 36,800   36,800   20,000      
WDA 2,944              

    2,944

        5,888  
  Balance c/fwd 33,856      

    33,856

           

Accounting period ended 31 December 2014

  8% pool 8% pool Non-qualifying Total allowances        
                 
Balance b/fwd 33,856   33,856   20,000      
Sold (90,000) (36,000)              

    (36,000)

    (18,000)

       
  Balance (2,144)  

    (2,144)

    2,000

                   
  BC             (4,288)  

Summary

Net allowances given: £8,000

Net cost to lessor: £10,000

References

Treatment of disposal proceeds TTM10450