Example
A company enters the tonnage tax regime on 1 January 2001
Its capital allowance computation as at 1 January 2001/31 December 2000 shows:
| Description | - | Additional information |
|---|
| WDV general pool | 160000 | (comprising safety standby ship A, MV 140,000, and office equipment MV 5,000) |
| WDV single ship pool | 02/12/2652 | (diving support vessel, ship B) |
| Free depreciation on B | 55000 | - |
During the accounting period year ended 31 December 2001 it purchases two further ships:
| Date | Cost | Amount | Additional informtion |
|---|
| 04/01/2001 | Cost | 4000000 | (diving support vessel, ship C) |
| 10/01/2001 | Cost | 500000 | (safety standby ship D) |
During the AP ended 31 December 2001 the vessels are operated:
| Ship | UK Sector of North Sea | Days | Outside UK territorial waters | Days |
|---|
| A | 1/1/2001 – 31/12/2001 | 365 | - | - |
| B | - | - | 1/1/2001 – 31/12/2001 | 365 |
| C | - | - | 1/4/2001 – 31/12/2001 | 275 |
| D | 1/10/2001 – 31/12/2001 | 92 | - | - |
| Total days | - | 457 | - | 640 |
During the AP ended 31 December 2002 the vessels are operated:
| Ship | UK Sector of North Sea | Days | Outside UK territorial waters | Days |
|---|
| A | 1/1/2002 – 31/12/2002 | 365 | - | - |
| B | 1/3/2002 – 30/9/2002 | 214 | 1/1/2002 – 28/2/2002, 1/10/2002 – 31/12/2002 | 59, 92, 151 |
| C | 1/4/2002 – 31/12/2002 | 275 | 1/1/2002 – 31/3/2002 | 90 |
| D | 1/1/2002 – 31/12/2002 | 365 | - | - |
| Total days | - | 1219 | - | 241 |
The office equipment is used generally to support all vessels.
To calculate unrelieved qualifying expenditure:
Ship A
Already in use for 'offshore activities' on entering tonnage tax.
| Description | Amount | Calculation | Amount | Equals | Amount |
|---|
| Apportion pool | 160000 | x | 140000 | = | 154,483 |
| - | - | - | 145000 | - | - |
Office equipment
Already partly in use for 'offshore activities' on entering tonnage tax.
| Description | Amount | Calculation | Amount | Equals | Amount |
|---|
| Apportion pool | 160000 | x | 5000 | = | 5,517 |
| - | - | - | 145000 | - | - |
Ship B
Already in use, but outside UK waters, on entry into tonnage tax.
Moves into UK Sector on 1/3/2002
Notional qualifying expenditure is as if brought into use immediately
| Description | Amount | Equals | Total |
|---|
| Single ship pool WDV | 275000 | - | - |
| plus free depreciation | 55000 | = | 330000 |
It is then written down in accordance with SI00/2303/REG7 and REG4 table
| Description | Amount |
|---|
| Notional qualifying expenditure on 1/1/2001 | 330000 |
| Percentage to be used per REG4 table as at beginning of AP commencing 1/1/2002 (1 year or less) | 0.75 |
| Balance of qualifying expenditure as at 1/1/2002 | 247500 |
Ship C
Purchased after entering tonnage tax, but used outside UK waters for first 10 months
| Description | Amount |
|---|
| Notional qualifying expenditure is cost | 4000000 |
| It is then written down in accordance with REG7 and the REG4 table; that is, cost as at 1/4/2001 | 4000000 |
| Description | Amount |
|---|
| Percentage to be used per REG4 table as at beginning of AP commencing 1/1/2002 (1 year or less) | 0.75 |
| Balance of qualifying expenditure as at 1/1/2002 | 3,000,000 |
Ship D
| Description | Amount |
|---|
| Brought into use in UK waters immediately so notional qualifying expenditure as at 1/10/2001 is cost | 500000 |
Capital Allowance Computation for AP YE 31/12/2001
| Description | Ship A | Ship B | Ship C | Ship D | **Office Equipment | Amount |
|---|
| NQE | 154483 | - | - | 500000 | 5517 | - |
| 25% WDA | 38621 | - | - | 125000 | 1379 | - |
| Offshore | 365 | - | - | 365 | 457 | - |
| fraction | 365 | - | - | 365 | 1097 | - |
| CA given | 38621 | - | - | 125000 | 575 | 164196 |
| WDV c/fwd | 115862 | - | - | 375000 | 4138 | - |
Capital Allowance Computation for AP YE 31/12/2002
| Description | Ship A | Ship B | Ship C | Ship D | **Office Equipment | Amount |
|---|
| NQE/WDV | 115862 | 247500 | 3000000 | 375000 | 5517 | - |
| 25% WDA | 28966 | 61875 | 750000 | 93750 | 1379 | - |
| Offshore fraction | 365/365 | 214, 365 | 275, 365 | 365, 365 | 1,219, 1,460 | - |
| CA given | 28966 | 36278 | 565069 | 93750 | 1152 | 725,215 |
| WDV c/fwd | 86896 | 185625 | 2250000 | 281250 | 4810 | - |
** The calculation for the office equipment, based on the number of ship-days offshore and in tonnage tax, is suggested for such mixed use as providing a 'just and reasonable' result, see TTM09040.
References
| References | Link |
|---|
| Outline of capital allowance code for offshore activities | TTM11300 |
| Notional qualifying expenditure on existing assets | TTM11310 |
| Notional qualifying expenditure on new assets | TTM11320 |
| Proportionate reduction of allowances | TTM11330 |