TTM10510 - Ship leasing: Quantitative restrictions on allowances
Restrictions cease to apply: Procedure
When the quantitative restrictions cease to apply, an appropriate amount must be taken out of the lessor’s 18% and 6% tonnage tax pools and a corresponding amount must be allocated to the normal capital allowance pool.
Notional disposal
The first step is to bring an amount of notional disposal proceeds into account in the lessor’s 18% and 6% pools as at the date of the change in circumstances which ends the restriction.
The disposal value to be brought into account is the ‘tax written down value’ at that date. See:
- TTM10530 for details of how to calculate the tax written down value, and
- TTM10450 for details of the treatment of the disposal proceeds, including the allocation between the 18% and 6% pools.
This step effectively removes the ship from the tonnage tax class pools.
Notional expenditure
The lessor is then treated as incurring new capital expenditure on the provision of a leased ship outside the restrictions.
The amount of this new qualifying expenditure is the whole of the capital expenditure on the ship incurred by the lessor (at any time) written down at 18% per annum from the time it was incurred to the time of the change.
CAA01/S220 (1) applies to time-apportion that expenditure for the period from when it is treated as incurred, as would be the case for any other new expenditure on a finance leased asset, see CA28450.
This step has the effect of giving full allowances for the period from the date of the change.
Example
See TTM10520 for an example of how these provisions work in practice.
References
| FA00/SCH22/PARA99 (change of circumstances taking out case) | TTM17571 |
| Restrictions cease to apply: Introduction | TTM10500 |
| Restrictions cease to apply: Example | TTM10520 |