Capital Allowances Act 2001 section 138

Limit on amount deferred

Section 138 sets the maximum amount of a balancing charge on a ship that can be deferred, by requiring the deferred amount to be no more than the smallest of four specified limits.

• The deferred amount cannot exceed the balancing charge that would have arisen in the appropriate non-ship pool if no deferment claim had been made
• It also cannot exceed the amount actually attributable to the old ship (as calculated under section 139), nor the expenditure on new shipping expected to be incurred by the shipowner (or a group company) within six years of the disposal
• The deferment is further capped at the shipowner's profits or income from the qualifying activity for the period in question, ensuring a deferment claim cannot create a trading loss
• When calculating the profit cap, other deferments for the same period are taken into account, but trading losses brought forward are ignored — meaning deferment takes precedence over the use of carried-forward losses