CA25600 - PMA: Ships: Expenditure
on new shipping
CAA01/S146 - S150
The basic rule is that expenditure on the provision of a ship is
expenditure on new shipping if:
- the expenditure is qualifying expenditure
incurred wholly and exclusively for the purposes of a qualifying
activity carried on by the person who incurs the expenditure;
- when the expenditure is incurred it
appears that the ship:
- will be brought into use for the purposes
of the qualifying activity as a qualifying ship
CA25350, and
- will continue to be a qualifying ship
throughout a period of at least three years after that;
- the expenditure is expenditure that
qualifies for single ship treatment.
Expenditure on the provision of a ship is not expenditure on new
shipping if any of the following apply.
- Notice has been given that single ship treatment for it is not
to apply (wholly or in part)
CA25150.
- The ship is used for overseas leasing
CA24010.
- The ship has belonged to the person who incurred the
expenditure or any person connected with them at any time in the
six years ending with the current acquisition of the ship.
There are
anti avoidance rules. They stop expenditure on the
provision of a ship being expenditure on new shipping if it fails a
main object test. Expenditure is not expenditure on new shipping if
the main object, or one of the main objects, of the provision of
the ship for the person who incurred the expenditure's qualifying
activity, or of a series of transactions of which the provision of
the ship was one, was the deferment of a balancing charge.
You should report any case where you think that the
legislation is being exploited and you cannot use the main object
provisions to CT&VAT (Technical). In your report you should set
out the full facts and the company's reasons for entering into the
transactions.
Expenditure on the provision of a ship is not, and is treated
as never having been, expenditure on new shipping if:
- the ship is not a qualifying ship at some
time after the ship is first brought into use for the purposes of a
qualifying activity carried on by the person who incurred the
expenditure or a connected person, and
- that time is before the earlier of:
- the end of the period of three years which
begins when the ship is brought into use, and
- the first occasion after the beginning of
that three-year period when the ship does not belong to the person
who incurred the expenditure or any person connected with
them.
Expenditure on a ship incurred by a company other than the
shipowner, that is by a fellow group member, is not expenditure on
new shipping if:
- the company ceases to own the ship without
ever bringing it into use for the purposes of their qualifying
activity, or
- the ship is brought into use for the
purposes of their qualifying activity and there is a disposal event
less than three years after the ship is first brought into use;
or
- the ship is brought into use for the
purposes of the other company's qualifying activity and at a time
before the end of the three-year period beginning with the time
when the ship was brought into use the shipowner and the other
company are not members of the same group.
This means that expenditure on a ship incurred by a fellow group
member qualifies as expenditure on new shipping if and only if
they:
- bring it into use for the purposes of
their qualifying activity,
- continue to own it for three years after
it is brought into use, and
- stay a member of the same group as the
shipowner for three years after the ship is brought into use.
The three year period is reduced if, less than three years after
the ship has been brought into use, the ship is totally lost or it
is damaged so badly that it is impossible or not commercially
worthwhile to repair it. In such a case you look at the period
beginning with the ship's being brought into use and ending with
the loss or irreparable damage.
