TTM10460 - Ship Leasing: Quantitative restrictions on allowances
Disposals: Example
A large ro-ro ship (a long life asset for CA purposes) is acquired for £100m on 1 January 2012 by cross-Channel operator, Victory Ferries Ltd, by way of a lease from their bank. Victory Ferries Ltd has elected for Tonnage Tax with effect from 1 January 2000.
The bank’s leasing subsidiary, Firth Ship Leasing Ltd, claims capital allowances for the year ended 31/12/2012 and for year ended 31/12/2013.
The ship is sold by Victory Ferries Ltd, as agent for Firth Ship Leasing Ltd, for £90m on 1/5/2014.
The capital allowances available to Firth Ship Leasing Ltd are as follows (amounts in £’000s):
Accounting period ended 31 December 2012
| - | 8% pool | 8% pool | Non-qualifying | Total allowances |
|---|---|---|---|---|
| Cost (100,000) | 40,000 | 40,000 | 20,000 | - |
| WDA | 3,200 | 3,200 | - | 6,400 |
| Balance carried forward | 36,800 | 36,800 | - | - |
Accounting period ended 31 December 2013
| - | 8% pool | 8% pool | Non-qualifying | Total allowances |
|---|---|---|---|---|
| Balance brought forward | 36,800 | 36,800 | 20,000 | - |
| WDA | 2,944 | 2,944 | - | 5,888 |
| Balance carried forward | 33,856 | 33,856 | - | - |
Accounting period ended 31 December 2014
| - | 8% pool | 8% pool | Non-qualifying | Total allowances |
|---|---|---|---|---|
| Balance brought forward | 33,856 | 33,856 | 20,000 | - |
| Sold (90,000) | (36,000) | (36,000) | (18,000) | - |
| Balance | (2,144) | (2,144) | 2,000 | - |
| BC | - | - | - | (4,288) |
Summary
Net allowances given: £8,000
Net cost to lessor: £10,000
References
Treatment of disposal proceeds TTM10450