Taxes Consolidation Act 1997 Schedule 18B paragraph 13

Plant and machinery: change of use of tonnage tax asset

Paragraph 13 sets out the capital allowance treatment where machinery or plant acquired after a company entered tonnage tax begins to be used wholly or partly for the purposes of another trade.

• Where a tonnage tax asset is switched entirely to another trade, capital expenditure is deemed to have been incurred in the chargeable period of the switch, equal to the lesser of actual cost and open market value at the date of the switch.
• Where the asset begins to be used partly for another trade and partly for the tonnage tax trade, it is treated as two separate assets, one for each trade.
• Capital allowances on the portion attributed to the other trade are determined on a just and reasonable basis, having regard to all relevant circumstances.
• No capital allowance consequences arise where a tonnage tax asset is diverted to non-trade purposes, so no provision is needed for that scenario.