Taxes Consolidation Act 1997 Schedule 18B paragraph 12

Plant and machinery: new expenditure partly for tonnage tax purposes

Paragraph 12 sets out the capital allowance treatment where a tonnage tax company incurs capital expenditure on machinery or plant used partly for its tonnage tax trade and partly for another trade.

• Where machinery or plant is used partly for the tonnage tax trade and partly for another trade of the company, it is treated as two separate assets — one used exclusively for the tonnage tax trade and the other used exclusively for the other trade.
• Capital allowances (or balancing charges) under Part 9 are determined only in respect of the portion treated as used for the other trade, based on a just and reasonable apportionment having regard to all relevant circumstances, particularly the extent of use for the other trade.
• No separate provision is needed for assets used wholly for the tonnage tax trade, because section 697O(1) already prevents any capital allowances from being given — and where no allowances are given, no balancing charge can arise on disposal.
• No provision is needed for assets diverted from the tonnage tax trade to non-trade use, because once an asset is acquired for the tonnage tax trade it falls outside the capital allowances regime entirely.