Taxes Consolidation Act 1997 Schedule 18B paragraph 18

Deferment of balancing charge on re-investment

Paragraph 18 provides for the deferment of a balancing charge where a tonnage tax company (or a fellow group member) reinvests the proceeds from the disposal of a qualifying ship in one or more replacement qualifying ships within five years.

• Where a balancing charge arises on the disposal of a qualifying ship, it may be reduced or eliminated if the company or another qualifying company in the same tonnage tax group reinvests in a new qualifying ship within five years of the disposal.
• If the reinvestment cost is less than the (reduced) balancing charge, only the excess is charged; if the reinvestment cost equals or exceeds the charge, no balancing charge arises.
• If the replacement ship is itself disposed of while the company remains within tonnage tax and no further qualifying reinvestment is made, a balancing charge is triggered on the deferred amount.
• The standard reinvestment relief under section 290 does not apply to balancing charges covered by this paragraph.