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HMRC internal manual

Tonnage Tax Manual

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Schedule 22 Finance Act 2000: the ring fence - capital allowances - Para 80 during - plant and machinery - deferment of balancing charge

FA00/SCH22/PARA80

(1) If-

(a) a balancing charge under this Part of this Schedule arises in connection with the disposal of a qualifying ship, and

(b) within the requisite period the company incurs capital expenditure on acquiring one or more other qualifying ships, and

(c) the company claims relief under this paragraph,

only the amount (if any) by which the balancing charge exceeds that expenditure must be given effect in the accounting period in which the charge arises and the rest may be held over.

(2) For the purposes of this paragraph-

(a) the disposal of a qualifying ship includes any event within section 61(1)(a) to (d) of the Capital Allowances Act 2001 occurring with respect to a qualifying ship, and

(b) the requisite period is the period beginning one year before, and ending two years after, the date of the disposal.

(3) If the new qualifying ship (or any of them) is disposed of before the end of the period of seven years after the company in question entered tonnage tax-

(a) there is a balancing charge under this paragraph when the disposal occurs, and

(b) the amount of that charge is equal to the amount held over under sub-paragraph (1) by reference to the acquisition of that ship.

This is subject to any reduction under paragraph 78 and to any further deferment under this paragraph.

(4) Sections 135 to 156 of the Capital Allowances Act 2001 (deferment of balancing charges) do not apply in relation to balancing charges arising when the company is subject to tonnage tax.

(5) The fact that there is a balancing charge under this paragraph does not affect the operation of paragraph 77 in a case where that paragraph also applies.

History

Amended by Schedule 2 CAA 2001. Up to 31st March 2001 subparagraphs 2 and 4 read:

(2) For the purposes of this paragraph-

(a) the disposal of a qualifying ship includes any event within section 24(6)(c)(i) to (iii) of the Capital Allowances Act 1990 occurring with respect to a qualifying ship, and

(b) the requisite period is the period beginning one year before, and ending two years after, the date of the disposal.

(4) Sections 33A to 33F of the Capital Allowances Act 1990 (deferment of balancing charges) do not apply in relation to balancing charges arising when the company is subject to tonnage tax.

References

Deferment of balancing charge arising after entry TTM09230