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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Ship leasing: Quantitative restrictions on allowances

Restrictions cease to apply: Procedure

When the quantitative restrictions cease to apply, an appropriate amount must be taken out of the lessor’s 18 per cent and 8 per cent tonnage tax pools and a corresponding amount must be allocated to the normal capital allowance pool.

Notional disposal

The first step is to bring an amount of notional disposal proceeds into account in the lessor’s 18 per cent and 8 per cent pools as at the date of the change in circumstances, which ends the restriction.

The disposal value to be brought into account is the ‘tax written down value’ at that date.  See:

  • TTM10530 for details of how to calculate the ‘tax written down value’
  • TTM10450 for details of the treatment of the disposal proceeds (including the allocation between the 18 per cent and 8 per cent pools)

This step effectively removes the ship from the tonnage tax class pools.

Notional expenditure

The lessor is then treated as incurring new capital expenditure on the provision of a leased ship outside the restrictions.

The amount of this new qualifying expenditure is the whole of the capital expenditure on the ship incurred by the lessor (at any time) written down at 18 per cent per annum from the time it was incurred to the time of the change.

CAA01/S220 (1) applies to time-apportion that expenditure for the period from when it is treated as incurred, as would be the case for any other new expenditure on a finance-leased asset (see CA28450).

This step has the effect of giving full allowances for the period from the date of the change.


See TTM10520 for an example of how these provisions work in practice.


FA00/SCH22/PARA99 (change of circumstances taking out case) TTM17571
Restrictions cease to apply: Introduction TTM10500
Restrictions cease to apply: Example TTM10520