TTM10150 - Ship leasing: Defeased leasing
Valuing the ship
In measuring the ‘non-compliance risk’ it will be necessary to take into account the future realisable value of the ship.
This may be derived from a series of valuations carried out as at regular intervals over the length of the lease. For example, on a 20-25 year lease valuations should be made as at intervals of not less than 5 years.
These should be professional valuations, taking into account normal valuation principles. Factors such as:
- the anticipated state of that sector of the shipping market,
- the forecast of future trends, and
- the adaptability or otherwise of the ship to other purposes and the dominance of the lessee in that particular sector
may be relevant if they are part of a normal valuation process.
The valuations of the ship should be done from the perspective of Day 1 – if the circumstances subsequently change, HMRC will not seek to revisit the valuation.
The ship should be valued unencumbered by any security sought, such as a mortgage given to a third party guarantor, to avoid any difficulties with circularity.