TTM10530 | Ship leasing: Quantitative restrictions on allowances

Calculating the tax written down value

When the quantitative restrictions on the capital allowances available to a lessor begin to apply or cease to apply partway through the term of a lease it is necessary to work out the tax written down value (TWDV) of the ship in question.

The TWDV of the ship is the full amount of the qualifying expenditure relating to the ship:

• less any first year allowance claimed by the lessor (even if postponed), and

• less the maximum amount of writing down allowance available to be claimed throughout the period of ownership (whether or not claimed or postponed).

If the TWDV has to be calculated at a time other than the beginning or end of an accounting period, it is worked out as if an accounting period did end at that time, so that the ship is correctly written down for the final part period.