Office of Public Sector Information
(1) Expenditure is qualifying expenditure if—
(a) it is capital expenditure on constructing works in connection with the working of a source of mineral deposits,
(b) it is incurred for the purposes of a mineral extraction trade, and
(c) the works—
(i) are likely to be of little or no value, when the source is no longer worked, to the last person working the source, or
(ii) if the source is worked under a foreign concession, are likely to become valueless, when the concession ends, to the last person working the source under the concession.
(2) For the purposes of subsection (1), expenditure on constructing works does not include expenditure on acquiring the site of the works or any right in or over the site.
(3) In subsection (1)(c) “foreign concession” means a right or privilege granted by the government of, or any municipality or other authority in, a territory outside the United Kingdom.
(1) Subject to subsection (3), expenditure is qualifying expenditure if—
(a) it is incurred by a person carrying on a mineral extraction trade outside the United Kingdom and for the purposes of that trade,
(b) it is a contribution consisting of a capital sum to the cost of buildings or works to which this section applies, and
(c) the buildings or works are likely to be of little or no value, when the source is no longer worked, to the last person working the source.
(2) The buildings or works to which this section applies are—
(a) buildings to be occupied by persons employed at or in connection with the working of a source outside the United Kingdom;
(b) works for the supply of water, gas or electricity wholly or mainly to buildings occupied or to be occupied by persons so employed;
(c) works to be used to provide other services or facilities wholly or mainly for the welfare of persons so employed or their dependants.
(3) Expenditure is not qualifying expenditure if the person making the contribution—
(a) acquires an asset as a result of the expenditure, or
(b) is entitled to an allowance for the expenditure under any other provision of the Tax Acts.
(1) If—
(a) a person who has ceased to carry on a mineral extraction trade incurs expenditure on the restoration of a relevant site, and
(b) the expenditure is incurred within 3 years from the last day of trading and meets the further conditions in subsection (3),
the net cost of the restoration is qualifying expenditure.
(2) The qualifying expenditure is treated as incurred on the last day of trading.
(3) The further conditions are that the expenditure—
(a) has not been deducted in calculating for tax purposes the profits of any trade carried on by that person, and
(b) would have been—
(i) deductible in calculating the profits of the trade, or
(ii) capable of being qualifying expenditure under this Chapter,
if the expenditure had been incurred while the trade was being carried on.
(4) If any expenditure incurred by a person is qualifying expenditure under this section—
(a) the whole of the expenditure on the restoration (not just the net cost) is not deductible in calculating the person’s income for any tax purposes, and
(b) none of the amounts subtracted to produce the net cost is to be treated as the person’s income for any tax purposes.
(5) “Restoration” includes—
(a) landscaping,
(b) in relation to land in the United Kingdom, the carrying out of any works required as a condition of granting planning permission for development consisting of the winning and working of minerals, and
(c) in relation to land outside the United Kingdom, the carrying out of any works required by any equivalent condition imposed under the law of the territory in which the land is situated.
(6) A “relevant site” means—
(a) the site of a source to the working of which the mineral extraction trade related, or
(b) land used in connection with working such a source.
(7) “The net cost of the restoration” means the expenditure incurred on the restoration less any amounts—
(a) received within 3 years from the last day of trading, and
(b) attributable to the restoration of the relevant site (for instance, amounts for spoil or other assets removed from the site or for tipping rights).
(8) All such adjustments are to be made, by way of discharge or repayment of tax or otherwise, as are necessary to give effect to this section.
(1) Whether a person who has incurred qualifying expenditure is entitled to a writing-down allowance or a balancing allowance, or liable to a balancing charge, for a chargeable period depends on—
(a) how much of the expenditure is unrelieved qualifying expenditure for that period (“UQE”), and
(b) the total of any disposal receipts to be brought into account for that period (“TDR”) by reference to the expenditure.
(2) If UQE exceeds TDR, the person is entitled to a writing-down allowance or a balancing allowance for the period.
(3) If TDR exceeds UQE, the person is liable to a balancing charge for the period.
(4) The entitlement under subsection (2) is to a writing-down allowance except in cases for which sections 426 to 431 provide for the entitlement to be to a balancing allowance.
(1) The amount of the writing-down allowance to which a person is entitled for any chargeable period in respect of qualifying expenditure is—
(a) in the case of qualifying expenditure on the acquisition of a mineral asset, 10% of the amount by which UQE exceeds TDR;
(b) in the case of other qualifying expenditure, 25% of the amount by which UQE exceeds TDR.
(2) If the chargeable period is more or less than a year, the amount of the writing-down allowance is proportionately increased or reduced.
(3) If the mineral extraction trade has been carried on for part only of the chargeable period, the amount of the writing-down allowance is proportionately reduced.
(4) The amount of the balancing charge to which a person is liable for a chargeable period in respect of qualifying expenditure is—
(a) the amount by which TDR exceeds UQE, or
(b) if less, the allowances for earlier chargeable periods in respect of the expenditure less the total of any balancing charges for those periods in respect of the expenditure.
(5) The amount of the balancing allowance to which a person is entitled for a chargeable period in respect of qualifying expenditure is the amount by which UQE exceeds TDR.
(6) A person claiming a writing-down allowance or a balancing allowance may require the allowance to be reduced to a specified amount.
(1) A person’s unrelieved qualifying expenditure for the chargeable period in which the qualifying expenditure is incurred is the whole of it.
(2) A person’s unrelieved qualifying expenditure for a chargeable period after that in which the qualifying expenditure is incurred is the amount, if any, by which it exceeds the aggregate of—
(a) the allowances made in respect of the expenditure for earlier chargeable periods, and
(b) the total of any disposal receipts for earlier chargeable periods.
In sections 417 to 419 “disposal receipt” means a disposal value that a person is required to bring into account in accordance with—
(a) sections 421 to 425, or
(b) paragraph 11 of Schedule 12 to FA 1997 (finance lease or loan: receipt of major lump sum) or any other enactment.
(1) This section applies if—
(a) a person has incurred qualifying expenditure on providing assets (including the construction of works), and
(b) any of those assets—
(i) is disposed of, or
(ii) permanently ceases to be used by him for the purposes of a mineral extraction trade (whether because of the discontinuance of the trade or for any other reason).
(2) The person is required to bring the disposal value of the asset into account for the chargeable period in which the disposal or cessation occurs.
(1) This section applies if—
(a) a person has acquired a mineral asset,
(b) at any time after the acquisition, the asset begins to be used (by him or another person) in a way which constitutes development, and
(c) the development is not—
(i) existing permitted development, or
(ii) development for the purposes of a mineral extraction trade carried on by the person.
(2) The person is required to bring the disposal value of the mineral asset into account for the chargeable period in which the use begins.
(3) Development is existing permitted development if at the time of the acquisition—
(a) it has been, or had begun to be, lawfully carried out, or
(b) it could be lawfully carried out under planning permission granted by a general development order.
(4) In applying subsection (3) in relation to land outside the United Kingdom—
(a) whether, at the time of the acquisition, development has been, or had begun to be, lawfully carried out is to be determined according to the law of the territory in which the land is situated, and
(b) whether, at that time, development could be lawfully carried out under planning permission granted by a general development order is to be determined as if the land were in England.
(1) The disposal value to be brought into account under section 421 or 422 depends on the event requiring it to be brought into account, as shown in the Table—
| 1. Event | 2. Disposal value |
|---|---|
| 1. Sale of the asset, except in a case where item 2 applies. | The net proceeds of the sale, together with— (a)
any insurance money received in respect of the asset as a result of an event affecting the price obtainable on the sale, and (b)
any other compensation of any description so received, so far as it consists of capital sums. |
2. Sale of the asset where— (a)
the sale is at less than market value, (b)
there is no charge to tax under Schedule E, and (c)
the condition in subsection (3) is met by the buyer. |
The market value of the asset at the time of the sale. |
| 3. Demolition or destruction of the asset. | The net amount received for the remains of the asset, together with— (a)
any insurance money received in respect of the demolition or destruction, and (b)
any other compensation of any description so received, so far as it consists of capital sums. |
| 4. Permanent loss of the asset otherwise than as a result of its demolition or destruction. | Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received. |
| 5. Permanent discontinuance of the trade followed by the occurrence of an event within any of items 1 to 4. | The disposal value for the item in question. |
| 6. Any event not falling within any of items 1 to 5. | The market value of the asset at the time of the event. |
(2) The amounts referred to in column 2 of the Table are those received by the person required to bring the disposal value into account.
(3) The condition referred to in item 2 of the Table is met by the buyer if—
(a) the buyer’s expenditure on the acquisition of the asset cannot be qualifying expenditure under Part 2 or 6 (plant and machinery and research and development allowances), or
(b) the buyer is a dual resident investing company which is connected with the seller.
(1) If the asset in relation to which a disposal value is required to be brought into account under section 421 or 422 is an interest in land, the disposal value is restricted by excluding the undeveloped market value of the interest.
(2) “The undeveloped market value of the interest” means the amount that, at the time of the disposal, the interest might reasonably be expected to fetch on a sale in the open market on the assumptions in subsection (3).
(3) The assumptions are that—
(a) there is no source of mineral deposits on or in the land, and
(b) it will only ever be lawful to carry out existing permitted development.
(4) Development is existing permitted development if at the time of the disposal—
(a) it has been, or had begun to be, lawfully carried out, or
(b) it could be lawfully carried out under planning permission granted by a general development order.
(5) In applying subsection (4) in relation to land outside the United Kingdom—
(a) whether, at the time of the disposal, development has been, or had begun to be, lawfully carried out is to be determined according to the law of the territory in which the land is situated, and
(b) whether, at that time, development could be lawfully carried out under planning permission granted by a general development order is to be determined as if the land were in England.
(1) This section applies if a person—
(a) has incurred qualifying expenditure, and
(b) receives a capital sum which, in whole or in part, it is reasonable to attribute to that expenditure.
(2) The person is required to bring into account as a disposal value for the chargeable period in which the capital sum is received so much of the capital sum as is reasonably attributable to the qualifying expenditure.
(3) This section does not apply if the capital sum falls to be brought into account under section 421 or 422.
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
(a) the expenditure is qualifying expenditure under—
(i) section 401(4) (pre-trading exploration expenditure where exploration etc. has ceased before first day of trading), or
(ii) section 402 (pre-trading expenditure on plant or machinery), and
(b) the first day of trading occurs in that chargeable period.
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
(a) the qualifying expenditure is expenditure on mineral exploration and access,
(b) he gives up the exploration, search or inquiry to which the expenditure related in that chargeable period, and
(c) he does not then or later carry on a mineral extraction trade which consists of or includes the working of mineral deposits to which the expenditure related.
(1) A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
(a) in that chargeable period he permanently ceases to work particular mineral deposits, and
(b) the qualifying expenditure is expenditure incurred—
(i) on mineral exploration and access relating solely to those deposits, or
(ii) on acquiring a mineral asset consisting of those deposits or part of them.
(2) If the person carrying on the mineral extraction trade is entitled to two or more mineral assets which at any time were—
(a) comprised in a single mineral asset, or
(b) otherwise derived from a single mineral asset,
subsection (1) does not apply until such time as the person permanently ceases to work the deposits comprised in all the mineral assets concerned taken together.
(3) For the purposes of subsection (2), if a mineral asset relates to, but does not actually consist of, mineral deposits, the deposits to which the asset relates are to be treated as comprised in the asset.
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
(a) the expenditure is qualifying expenditure under section 415 (contributions to buildings or works for benefit of employees abroad), and
(b) in that chargeable period the buildings or works permanently cease to be used for the purposes of or in connection with the mineral extraction trade.
(1) A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
(a) the qualifying expenditure was incurred on the provision of any assets, and
(b) in that chargeable period any of those assets—
(i) is disposed of, or
(ii) otherwise permanently ceases to be used by him for the purposes of the mineral extraction trade.
(2) A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if any of the following events occurs in that chargeable period in relation to assets representing the qualifying expenditure—
(a) the person loses possession of the assets in circumstances where it is reasonable to assume that the loss is permanent;
(b) the assets cease to exist as such (as a result of destruction, dismantling or otherwise);
(c) the assets begin to be used wholly or partly for purposes other than those of the mineral extraction trade carried on by the person.
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if in that chargeable period the mineral extraction trade is permanently discontinued.
An allowance or charge to which a person is entitled or liable under this Part is to be given effect in calculating the profits of that person’s mineral extraction trade, by treating—
(a) the allowance as an expense of the trade, and
(b) the charge as a receipt of the trade.
(1) The net cost to a person of demolishing an asset which represents qualifying expenditure is added to that qualifying expenditure in determining the amount of any balancing allowance or balancing charge for the chargeable period in which the demolition occurs.
(2) “The net cost of the demolition” means the amount, if any, by which the cost of the demolition exceeds any money received for the remains of the asset.
(3) If this section applies, the net cost of the demolition is not treated as expenditure incurred on any other asset which replaces the demolished asset.
(1) For the purposes of this Part, expenditure incurred for the purposes of a mineral extraction trade by a person about to carry it on is treated as incurred by that person on the first day on which that person does carry it on.
(2) Subsection (1) does not apply to pre-trading expenditure on mineral exploration and access (for which specific provision is made by section 400(4)).
(1) This Part applies in relation to a share in an asset as it applies (under section 571) in relation to a part of an asset.
(2) For the purposes of those provisions, a share in an asset is treated as used for the purposes of a trade so long as, and only so long as, the asset is used for the purposes of the trade.
(1) In this Part—
“development”
“development order”,
“general development order”, and
“planning permission”,
have the meaning given by the relevant planning enactment.
(2) “The relevant planning enactment” means—
(a) in relation to land in England or Wales, section 336(1) of the Town and Country Planning Act 1990 (c. 8);
(b) in relation to land in Scotland, section 277(1) of the Town and Country Planning (Scotland) Act 1997 (c. 8);
(c) in relation to land in Northern Ireland, Article 2(2) of the Planning (Northern Ireland) Order 1991 (S.I.1991/1220 (N.I.11)).
Capital Allowances Act 2001