TTM10470 | Ship leasing: Quantitative restrictions on allowances

Restrictions begin to apply: Introduction

In some cases the quantitative restrictions on the allowances available to lessors may only begin to apply part way through a lease. For example:

• the company using the ship may not be a tonnage tax company at the start of the lease. If the ship is a qualifying ship, the restrictions will only begin to apply when that company becomes a tonnage tax company (either by electing into the regime, or because of the effect of the rules on mergers, see TTM12300);

• the ship may not be a qualifying ship at the start of the lease. If it is used by a tonnage tax company, the restrictions will begin to apply when it later becomes a qualifying ship (for example because of a change of use from being a river ferry to being a cross-channel ferry).

When the restrictions do begin to apply, the lessor will have to remove any expenditure on the leased ship from its normal capital allowance pool and allocate it to the special tonnage tax 18% and 6% class pools.

See TTM10480 for details of how the reallocation of expenditure is to be undertaken.

References