Capital Allowances Act 2001

Commentary on Sections

Glossary

Part 2: Plant and machinery allowances

Chapter 12: Ships

Section 146: Basic meaning of expenditure on new shipping

559.This section is based on section 33D(1) of CAA 1990. It provides the basic conditions for expenditure to qualify as expenditure on new shipping. Sections 147 to 150 give further rules.

560.Subsection (3)(a) requires that the expenditure is incurred wholly and exclusively for the purposes of a qualifying activity carried on by the person incurring the expenditure. This stops expenditure from qualifying if, for example, the ship is used only partly for purposes of the qualifying activity of the person incurring the expenditure.

561.Subsection (3)(b) requires that when the expenditure is incurred, it must appear that the ship will be used for a qualifying activity (as a qualifying ship) and will continue to do so for at least three years. This is to prevent the attribution of deferments to ships that are not intended to be used as qualifying ships. Section 33D(1)(a) does not include the words “when the expenditure is incurred”. But they are implicit in CAA 1990.

562.Subsection (3)(c) requires that the expenditure on the ship is allocated to a single ship pool. This stops expenditure on, for example, some ships for leasing from qualifying for the deferment rules.