TTM10460 - Ship Leasing: Quantitative restrictions on allowances

Disposals: Example

The following example was when the written down allowance for the Special Pool rate was 8%. The current rate is 6%.

A large ro-ro ship (a long life asset for CA purposes) is acquired for £100m on 1 January 2012 by cross-Channel operator, Victory Ferries Ltd, by way of a lease from their bank.  Victory Ferries Ltd has elected for tonnage tax with effect from 1 January 2000.

The bank's leasing subsidiary, Firth Ship Leasing Ltd, claims capital allowances for the year ended 31/12/2012 and for year ended 31/12/2013.

The ship is sold by Victory Ferries Ltd, as agent for Firth Ship Leasing Ltd, for £90m on 1/5/2014.

The capital allowances available to Firth Ship Leasing Ltd are as follows (amounts in £’000s):

Accounting period ended 31 December 2012

£

8% pool

8% pool

Non-qualifying

Total allowances

Cost (100,000) 40,000 40,000 20,000 -
WDA 3,200 3,200 - 6,400
Balance carried forward 36,800 36,800 - -

 

Accounting period ended 31 December 2013

£

8% pool

8% pool

Non-qualifying

Total allowances

Balance brought forward 36,800 36,800 20,000 -
WDA 2,944 2,944 - 5,888
Balance carried forward 33,856 33,856 - -

 

Accounting period ended 31 December 2014

£

8% pool

8% pool

Non-qualifying

Total allowances

Balance brought forward 33,856 33,856 20,000 -
Sold (90,000) (36,000) (36,000) (18,000) -
Balance (2,144) (2,144) 2,000 -
BC - - - (4,288)

 

Summary

Net allowances given: £8,000

Net cost to lessor: £10,000

References

Treatment of disposal proceeds  TTM10450