Capital Allowances Act 2001

Chapter 3U.K. Qualifying expenditure on acquiring a mineral asset

403 Qualifying expenditure on acquiring a mineral assetU.K.

(1)Expenditure on acquiring a mineral asset is qualifying expenditure if—

(a)it is capital expenditure, and

(b)it is incurred for the purposes of a mineral extraction trade.

(2)Subsection (1) is subject to—

• section 404 (exclusion of undeveloped market value of land), and

• section 406 (reduction where premium relief previously allowed).

[F1(2A)For the purposes of this section the reference to expenditure on acquiring a mineral asset does not include expenditure incurred on the restoration of a relevant site (within the meaning of section 416 or 416ZA).]

(3)In this Chapter “the buyer”, in relation to the acquisition of a mineral asset, means the person acquiring it.

404 Exclusion of undeveloped market value of landU.K.

(1)If the mineral asset is an interest in land, so much of the buyer’s expenditure on acquiring the asset as is equal to the undeveloped market value of the interest is not qualifying expenditure.

(2)“The undeveloped market value of the interest” means the amount that, at the time of the acquisition, 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 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.

(5)In applying subsection (4) 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.

(6)References in this section to the time of acquisition are not affected by section 434 (expenditure incurred before trade carried on).

(7)This section does not apply to the buyer’s expenditure if an election under section 569 (election to treat sale as being for alternative amount) is made in relation to the acquisition.

405 Qualifying expenditure where buildings or structures cease to be usedU.K.

(1)This section applies if—

(a)section 404 (exclusion of undeveloped market value of land) applies to limit the buyer’s qualifying expenditure on acquiring the mineral asset,

(b)the undeveloped market value of the interest in land includes the value of any buildings or structures on the land, and

(c)at the time of the acquisition, or at any later time, the buildings or structures permanently cease to be used for any purpose.

(2)The buyer is to be treated—

(a)as having incurred qualifying expenditure, on acquiring a mineral asset, of an amount equal to the unrelieved value of the buildings or structures, and

(b)as having incurred it when the buildings or structures permanently cease to be used for any purpose.

(3)The unrelieved value of the buildings or structures is—

(4)References in this section to the time of acquisition are not affected by section 434 (time when expenditure incurred).

406 Reduction where premium relief previously allowedU.K.

(1)This section applies if—

(a)the mineral asset is or includes an interest in land, and

(b)for chargeable periods previous to the chargeable period for which the buyer first becomes entitled to an allowance under this Part in respect of the expenditure on acquiring the mineral asset, deductions are made under [F2sections 60 to 67 of ITTOIA 2005 or under [F3sections 62 to 67 of CTA 2009]] (deductions in calculating trading profits where premiums etc. taxable).

(2)The amount of the expenditure on the acquisition of the mineral asset that is qualifying expenditure is reduced by—