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HMRC internal manual

Tonnage Tax Manual

Partnerships: Capital allowances

On exit from Tonnage Tax: Example

A 33:33:34 partnership exists between:

  • a tonnage tax company (X Ltd),
  • a UK non tonnage tax company (Y Ltd), and
  • a non-resident outside the charge to UK tax (C Inc.).

X Ltd and Y Ltd make up their accounts to 31 December each year.

The partnership has only one asset a ship which cost £12 million on 1 March 2009.

X Ltd leaves tonnage tax on 5 July 2010.

The partnership capital allowance claim made by Y Ltd for APE 31.12.2009 is £2 million in writing-down allowance.

Apply the formula in SI00/2303/REG8 (5), i.e.

(A% x B) + ((100% - A%) x C

In this case:

B=£9 million (75% of £12 million cost as asset has been held for less than a year)  
C=£10 million (£12 million cost less £2 million allowances claimed).

Substituting these values in the formula gives:

(33% x £9m) + (100% - 33%) x £10m  
which equals £2,970,000 + (67% x £10m)  
which equals £9,670,000.

£9,670,000 is the unrelieved qualifying expenditure (the ‘written down value’) for the partnership as at 1 January 2010.


SI00/2303/REG8(5)-(6) (capital alloances formula when partner leaves tonnage tax) TTM18008
Procedure on exit from tonnage tax TTM13420