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HMRC internal manual

Tonnage Tax Manual

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Schedule 22 Finance Act 2000: Part IX the ring fence - capital allowances - Para 77 during - plant and machinery - disposals

FA00/SCH22/PARA77

(1) This paragraph applies if when a company is subject to tonnage tax a disposal event occurs in relation to plant or machinery-

(a) in respect of which qualifying expenditure was incurred by the company before its entry into tonnage tax,

(b) some or all of the expenditure on which was carried to the tonnage tax pool on the company’s entry into tonnage tax, and

(c) which is used by the company for the purposes of its tonnage tax trade.

(2) A “disposal event” means an event as a result of which the company is required under Part 2 of the Capital Allowances Act 2001 to bring a disposal value into account.

In determining whether such an event has occurred references in that Part of that Act to a qualifying activity shall be read as including the company’s tonnage tax trade.

(3) Where this paragraph applies-

(a) the disposal value to be brought into account in respect of any plant or machinery is limited to its market value when the company entered tonnage tax, and

(b) the disposal value is set against the unrelieved qualifying expenditure in the company’s tonnage tax pool.

(4) If the amount of the disposal value is less than or equal to the amount of unrelieved qualifying expenditure in the company’s tonnage tax pool, the amount of unrelieved qualifying expenditure is reduced or extinguished accordingly.

(5) If-

(a) the amount of the disposal value exceeds the amount of unrelieved qualifying expenditure, or

(b) there is no unrelieved qualifying expenditure in the pool,

the company is liable to a balancing charge.

(6) The amount of the balancing charge is-

(a) where sub-paragraph (5)(a) applies, the amount of the excess, or

(b) where sub-paragraph (5)(b) applies, the amount of the disposal value.

This is subject to any reduction under paragraph 78.

History

Amended by Schedule 2 CAA 2001. Up to 31st March 2001 subparagraph 2 read:

(2) A “disposal event” means an event as a result of which the company is required under Part II of the Capital Allowances Act 1990 to bring a disposal value into account.

In determining whether such an event has occurred references in that Part of that Act to a trade shall be read as including the company’s tonnage tax trade.

References

Disposals of plant and machinery TTM09150