Commentary

D7.1017 Tonnage tax—capital allowances generally

Corporate tax
Corporate tax | Commentary

D7.1017 Tonnage tax—capital allowances generally

Corporate tax | Commentary

D7.1017 Tonnage tax—capital allowances generally

Under the general capital allowance rules within the tonnage tax regime, a company's entry into the tonnage tax regime is not a balancing event and a company will not be able to claim capital allowances in respect of assets used for its tonnage tax business whilst the election is in force. In addition to not being entitled to claim any annual investment, first year or writing down allowances, a tonnage tax company is not entitled to any balancing allowances on expenditure incurred or any capital allowances in respect of any additional VAT liability incurred in respect of capital expenditure1. The stated intention of the rules is that when the company leaves the tonnage tax regime, it will be put back broadly in the same position as it would have been in had it remained within the normal corporation tax system throughout2. Whether or not this is the case will however depend on the company or group's individual circumstances.

Entry into the tonnage tax regime

When a company enters the regime, it must extract the tax written down value of its tonnage tax assets from its existing capital allowance pools to create a 'tonnage tax pool' (effectively a 'frozen' pool).

In the case of the general pool, a proportion of the tax written down value of the pool is extracted. This is calculated by reference to the market values of the assets in the pool at the time of entry. HMRC will accept apportionment on the basis

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