TTM10490 - Ship Leasing: Quantitative restrictions on allowances
Restrictions begin to apply: Example
The following example was when the written down allowance for main rate pool was 25% and the special rate pool was 10%. The current rates are 18% and 6% respectively.
Partex Ltd is a leasing company claiming capital allowances at 25% on its machinery and plant pool for the accounting period (AP) year ended 31 December 2005. The pool includes several ships, which are either non-qualifying or leased to non-tonnage tax companies.
One of the leased ships in that pool (which originally cost £50m) becomes a qualifying ship within tonnage tax on 30 June 2005. As at 1 January 2005 the unrelieved qualifying expenditure in the machinery and plant general pool is £8 million.
The ‘tax written value’ of the ship is
- £4 million as at 1 January 2005 (Amount A)
- £3.5 million as at 30 June 2005 (Amount B).
The capital allowance consequences for the AP year ended 31 December 2005 are as follows:
- The normal capital allowances pool
- the amount treated as a disposal from the normal pool is Amount A: £4 million
- the writing down allowance on the remainder of the pool is (£8 million - £4 million) x 25% = £1,000,000
- The temporary pool
- the amount taken to the temporary pool is Amount A (£4 million) and the disposal value to be taken into account upon its closure on 30 June 2005 is Amount B: £3.5 million
- the balancing allowance upon closure of the temporary pool is £4 million - £3.5 million = £500,000
- The tonnage tax class pools
- this disposal value of £3.5 million is allocated 40/50 to the 25% pool and 10/50 to the 10% pool (in proportion to the original cost of the vessel), that is, £2.8 million and £0.7 million respectively
- writing-down allowances from the 25% pool are (£2.8 million x 6/12 x 25%) = £350,000
- writing-down allowances from the 10% are (£0.7 million x 6/12 x 10%) = £35,000
References
| Restrictions begin to apply: Introduction | TTM10470 |
| Restrictions begin to apply: Procedure | TTM10480 |