TTM13430 | Partnerships: Capital allowances

On exit from tonnage tax: Example

A 33:33:34 partnership exists between:

• a tonnage tax company (X Ltd),

• a UK non tonnage tax company (Y Ltd), and

• a non-resident outside the charge to UK tax (C Inc).

X Ltd and Y Ltd make up their accounts to 31 December each year.

The partnership has only one asset, a ship which cost £12 million on 1 March 2009.

X Ltd leaves tonnage tax on 5 July 2010.

The partnership capital allowance claim made by Y Ltd for APE 31 December 2009 is £2 million in writing-down allowance.

Apply the formula in SI00/2303/REG8 (5), namely

(A% x B) + ((100 - A)% x C

In this case:

A = 33%

B = £9 million (75% of £12 million cost as asset has been held for less than a year)

C = £10 million (£12 million cost less £2 million allowances claimed).

Substituting these values in the formula gives:

(33% x £9m) + (100 - 33)% x £10m

which equals £2,970,000 + (67% x £10m)

which equals £9,670,000.

£9,670,000 is the unrelieved qualifying expenditure (the ‘written down value’) for the partnership as at 1 January 2010.

References