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HMRC internal manual

Tonnage Tax Manual

HM Revenue & Customs
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Partnerships: Capital allowances

On exit from tonnage tax: Postponed allowances (free depreciation)

When a company leaves tonnage tax it cannot carry any postponed allowances with it. It will have had postponed allowances (or ‘free depreciation’) on tonnage tax assets written back into the tonnage tax pool upon entry to the regime and will have had no opportunity to claim or postpone any allowances whilst in the regime.

But when a tonnage tax company is in a partnership, the non-tonnage tax partners may have elected to postpone allowances.  And in the absence of any special rules, the tonnage tax company would share the full benefit of any balance of postponed allowances after it left tonnage tax.

In recognition of this Regulation 8(7) provides that any balance of postponed allowances held by a partnership is reduced in the event of one of its members leaving the tonnage tax regime.

The amount of postponed allowances available to the partnership is limited to the amount determined by the formula:

(100% - A%) x D


  • A% is the share in partnership property attributable to the company leaving tonnage tax (i.e. the same definition as is used in TTM13420), and
  • D is the total amount of postponed capital allowances (free depreciation) on hand.


SI00/2303/REG8(7) (postponed allowances when partner leaves tonnage tax) TTM18008