Taxes Consolidation Act 1997 Schedule 18B paragraph 14

Plant and machinery: change of use of non-tonnage tax asset

Paragraph 14 of Schedule 18B deals with the capital allowance consequences when a tonnage tax company diverts plant or machinery from a non-tonnage tax trade into its tonnage tax trade, either wholly or partly.

• Where an asset is wholly switched to the tonnage tax trade, no balancing allowance or balancing charge arises on the change of use itself.
• For any subsequent balancing event, deemed wear and tear under section 296 is ignored for periods the asset spent in the tonnage tax trade, and unallowed capital expenditure is frozen at the amount that applied on the date of the switch.
• Disposal proceeds for a subsequent balancing charge are capped at the lowest of the actual cost, the open market value at the switch date, and the actual proceeds or open market value at the time of the later event.
• Where an asset is only partly switched, it is treated as two separate assets, with the tonnage tax portion subject to the same rules as a wholly switched asset.