Example
A plc defers a balancing charge arising on the disposal of a ship on 6 February 2003. On 23 April 2005 A plc purchases a qualifying ship, S. S was owned by A plc’s subsidiary company, E Limited between 15 May 2001 and 6 June 2002. At all other times, S was owned by unconnected third parties.
Subsection (1)(a) does not prevent A plc from attributing the deferred balancing charge to the expenditure on S because the company has not previously owned the ship.
Subsection (1)(b), however, determines that the deferred amount may not be attributed to the expenditure on S. This applies because E Limited has owned the ship during the six years before S plc acquired the ship (on 23 April 2005) and A plc is connected with E Limited at a material time (in other words at some time between 6 February 2003 and 23 April 2005).
Section 148: Exclusions: object to secure deferment
565.This section is based on part of section 33D(4) of CAA 1990. It is an anti-avoidance provision which stops expenditure qualifying for attribution if deferment of a balancing charge was the object or one of the main objects of the transaction (or transactions) by which the ship was provided.
Section 149: Exclusions: later events
566.This section is based on section 33D(2) and (3) of CAA 1990. It means expenditure ceases to qualify for attribution if any of the events listed in subsection (1) occurs. This stops expenditure for ships, which only temporarily satisfy the conditions, being attributed to deferred balancing charges.
567.Subsection (1)(a) provides that the ship has to be a “qualifying ship” for the first three years after it is first brought into use. This term is defined in sections 151 to 154. The 3-year period stops early if the ship begins to be owned by an unconnected third party. CAA 1990 contains the words “without having been so brought into use”. This Act does not as the meaning is covered by the use in subsection (2)(a) of the words “first” and “if earlier”.
568.Subsection (1)(b) requires that the expenditure on the ship is not allocated to the appropriate non-ship pool. This only applies to the expenditure to which a deferred balancing charge is attributed. If the total expenditure on the provision of a ship exceeds the deferred amount, the excess can be allocated to the appropriate non-ship pool.
569.Subsection (1)(c) requires that the expenditure is not on a ship for overseas leasing which is not protected leasing.
Section 150: Exclusions where expenditure not incurred by shipowner
570.This section is based on section 33D(2A) and (2B) of CAA 1990. It stops expenditure incurred by a member of the same group of companies qualifying as expenditure on new shipping if the company:
ceases to own the ship before it is used for its qualifying activity; or
is required to bring in a disposal value in respect of the ship within the first three years of the ship being used,
unless it is because the ship is lost or irreparably damaged.
571.Subsection (4) has the same effect if the company and the shipowner cease to be members of the same group within three years of the ship being used by the company. But any changes in the group are ignored if they happen after the ship is lost or irreparably damaged.
Section 151: Basic meaning of qualifying ship
572.This section is based on section 33E(1) of CAA 1990. It provides the basic conditions for a ship to qualify for the deferment rules. That is:
for a balancing charge on the ship to be deferred; or
for expenditure on the ship to be attributed to a deferred charge.
Section 152: Ships under 100 tons
573.This section is based on section 33E(2) of CAA 1990. It relaxes the rule that requires a qualifying ship to have a gross registered tonnage of 100 tons or more. The relaxation applies if the disposal event giving rise to the balancing charge is or results from the total loss of a ship or the irreparable damage to it.
Section 153: Ships which are not qualifying ships
574.This section is based on section 33E(3) and (4) of CAA 1990. It provides that certain kinds of ships are not qualifying ships.
575.Subsection (1) excludes from the meaning of “qualifying ship” ships of a kind generally used for sport or recreation. Passenger ships and cruise liners are not treated as falling within this exclusion and may therefore be considered as qualifying ships.
576.Subsection (3) gives “offshore installations” and “controlled waters” the same meaning as in the Mineral Workings (Offshore Installations) Act 1971. The relevant definitions are reproduced below.
