Capital Allowances Act 1990

113Assets formerly owned by traders

(1)Subject to subsection (2) below, section 114 applies where a person carrying on a trade of mineral extraction (“the buyer”) incurs capital expenditure in acquiring an asset (“the purchased asset”) from another person in circumstances falling within subsection (3) below.

(2)This section and section 114 have effect subject to section 116, and neither this section, section 114 nor section 116 applies if—

(a)the purchased asset is a mineral asset situated in the United Kingdom; and

(b)the capital expenditure incurred by the buyer consists of the payment of sums under a contract entered into by him before 16th July 1985.

(3)Subject to subsection (5) below, the circumstances referred to in subsection (1) above are that—

(a)in connection with a trade of mineral extraction carried on by him, the other person referred to in subsection (1) above incurred expenditure on the acquisition or bringing into existence of the purchased asset; or

(b)that other person has not incurred expenditure as mentioned in paragraph (a) above but, at any time prior to the buyer’s acquisition, the purchased asset was owned by a person who, in connection with a trade of mineral extraction carried on by him, had incurred such expenditure as is mentioned in paragraph (a) above;

and, in a case where the purchased asset is a mineral asset situated in the United Kingdom, the reference in paragraph (b) above to a time prior to the buyer’s acquisition does not include any time earlier than 1st April 1986.

(4)In this section “the previous trader” means—

(a)where the circumstances are as mentioned in paragraph (a) of subsection (3) above, the person referred to in that paragraph; and

(b)where the circumstances are as mentioned in paragraph (b) of subsection (3) above, the last person who, prior to the buyer’s acquisition, incurred such expenditure as is mentioned in paragraph (a) of that subsection;

and, subject to subsections (5) and (6) below, any reference in section 114 to the previous trader’s qualifying expenditure is a reference to so much of the expenditure incurred by him on the acquisition or bringing into existence of the purchased asset as constituted his qualifying expenditure for the purposes of this Part.

(5)Any reference in subsections (3) and (4) above to the purchased asset includes a reference—

(a)to two or more assets which together make up the purchased asset; and

(b)to an asset from which or, as the case may be, to two or more assets from the combination of which the purchased asset is derived.

(6)Where the previous trader in fact incurred expenditure on the acquisition or bringing into existence of one or more assets from which the purchased asset is derived, so much of that expenditure as was qualifying expenditure of his for the purposes of this Part and as it is just and reasonable to attribute to the purchased asset shall be taken to be the previous trader’s qualifying expenditure.