Taxes Consolidation Act 1997 Schedule 18B paragraph 17

Set-off of accrued losses against balancing charge

Paragraph 17 of Schedule 18B allows a tonnage tax company to reduce a balancing charge on the disposal of a qualifying ship by setting off trading losses that accrued before the company entered the tonnage tax regime.

• Where a balancing charge arises on the disposal of a qualifying ship, the company may set off pre-tonnage tax losses against that charge.
• Eligible losses include those created by excess capital allowances that were treated as trading expenses under section 307 or 308.
• The losses must be attributable to activities that became part of the company's tonnage tax trade on entry to the regime.
• Losses attributable to a source of income that became relevant shipping income under tonnage tax also qualify for set-off.