TTM09250 | Capital allowances: Balancing charges (P&M)

Procedure on deferred balancing charge

A balancing charge deferred under FA00/SCH22/PARA80, see TTM09230, is not dealt with as a deferred balancing charge under CAA01/S135.

Under those normal rules, see CA25400, the balancing charge will not be brought into account in the Corporation Tax computations if a claim for deferral is made for that period. And there are procedures for recovering the balancing charge if a replacement ship is not acquired.

Under the tonnage tax rules, PARA80 only allows a claim to be made if:

• a balancing charge arises,

and

• within the relevant period capital expenditure is incurred on a qualifying ship, see TTM09230.

Thus, in order to make a claim the company must have already acquired the replacementship(s).

Example 1

A tonnage tax company, with an accounting period year ended 31 December 2013, that would incur a balancing charge on disposal of a ship on 30 November 2013, and acquires a new ship (of sufficient value) on 31 August 2014, then

• if it makes a claim for deferral of the balancing charge in its self-assessment return for AP year ended 31 December 2013 (filed in October 2014),

• the balancing charge will not be included in its returned profits, and remains ‘held over’ against the new ship.

A record is needed to ensure that the charge is reinstated for the AP year ended 31 December 2013 should the new ship be sold within the 7-year period of entering tonnage tax, see TTM09230.

Example 2

As for Example 1, but the company does not acquire a new ship until 31 October 2015, within the time limit expiring on 30 November 2015, then:

• in its computations for the AP year ended 31 December 2013, with filing date of 31 December 2014, it must include the balancing charge (and pay tax on it), and

• claim relief after 31 October 2015 (4 year time limit – see CTM 90610) in respect of its acquisition of a new ship, and submit an amended return, see CTM93300, for AP year ended 31 December 2013.

A record is needed to ensure that the charge is reinstated for the AP year ended 31 December 2013 should the new ship be sold within the 7-year period after entering tonnage tax, see TTM09230.

References