Finance Act 1986

55 New code of allowances for capital expenditure on mineral extraction

(1) The provisions of Chapter III of Part I of the [1968 c. 3.] Capital Allowances Act 1968 (which relate to allowances for certain capital expenditure incurred in connection with mineral extraction activities and which are in this section referred to as "the old code of allowances") shall cease to have effect on 31st March 1986 except as provided by Schedule 14 to this Act.

(2) The provisions of Parts I to IV of Schedule 13 to this Act have effect to provide for relief in respect of certain new expenditure incurred by persons carrying on a trade of mineral extraction; and the provisions of Schedule 14 to this Act have effect with respect to certain expenditure incurred before 1st April 1987 by persons carrying on such a trade.

(3) Subject to paragraph 2 of Schedule 14 to this Act, for the purposes of the old code of allowances, the following provisions of this section and Schedules 13 and 14 to this Act, as respects any company which on 31st March 1986 was carrying on a trade of mineral extraction, it shall be assumed that, unless the latest accounting period of the company which begins on or before 31st March 1986 in fact ends on that date.—

(a) that accounting period ends on that date; and

(b) a new one begins on 1st April 1986, the new accounting period to end with the end of the true accounting period.

(4) Subject to paragraph 2 of Schedule 14 to this Act, for the purposes of the provisions referred to in subsection (3) above as they apply to a person who on 31st March 1986 was within the charge to income tax in respect of the profits or gains of a trade of mineral extraction carried on by him, it shall be assumed that, unless the latest basis period of his (determined in accordance with section 72 of the [1968 c. 3.] Capital Allowances Act 1968) which begins on or before 31st March 1986 in fact ends on that date.—

(a) that basis period ends on that date; and

(b) a new basis period begins on 1st April 1986, the new basis period to end with the end of the true basis period.

(5) In any case where—

(a) new expenditure is incurred by any person on the provision of machinery or plant for the purposes of mineral exploration and access, as defined in paragraph 1 of Schedule 13 to this Act, and

(b) that expenditure is so incurred before the first day on which that person begins to carry on a trade of mineral extraction, and

(c) on that first day the machinery or plant belongs to him, and does not fall within paragraph 5(1)(d) of Schedule 13 to this Act,

that person shall be treated for the purposes of Chapter I of Part III of the [1971 c. 68.] Finance Act 1971 (the normal code applicable to machinery or plant) and section 57 of the [1985 c. 54.] Finance Act 1985 (short-life assets) as if he had sold the machinery or plant immediately before that first day and had on that first day incurred capital expenditure on the provision of the machinery or plant wholly and exclusively for the purposes of the trade, being expenditure equal to the expenditure incurred (or, where there has been an actual previous sale and re-acquisition, last incurred) as mentioned in paragraph (a) above.

(6) For the purpose of the application of Chapter I of Part III of the [1971 c. 68.] Finance Act 1971—

(a) in relation to expenditure treated by virtue of subsection (5) above as incurred on the first day on which a person begins to carry on a trade of mineral extraction, and

(b) in relation to expenditure actually incurred on or after that day on the provision of machinery or plant for the purposes of mineral exploration and access,

that Chapter shall have effect subject to the amendments in subsection (7) below.

(7) The amendments referred to in subsection (6) above are—

(a) in section 50 of the [1971 c. 68.] Finance Act 1971 (the interpretation provisions applicable to allowances relating to machinery or plant) in subsection (1), after the definition of "income" there shall be inserted—

• “'mineral exploration and access' and 'trade of mineral extraction' have the same meaning as in Schedule 13 to the Finance Act 1986”;

(b) after subsection (7) of that section there shall be inserted the following subsection—

“(7A) For the purposes of this Chapter, where a person is carrying on a trade of mineral extraction, expenditure incurred by him in connection with that trade on the provision of machinery or plant for mineral exploration and access shall be taken to be incurred on the provision of the machinery or plant wholly and exclusively for the purposes of that trade”;

(c) in section 44(5) of that Act (disposal values) at the end of sub-paragraph (ii) of paragraph (c) there shall be added the words "or, in the case of machinery or plant which was in use for mineral exploration and access, he abandons the machinery or plant at the site where it was in use for that purpose"; and

(d) in paragraph 7 of Schedule 8 to that Act (use after user not attracting capital allowances etc.) sub-paragraph (2) (which relates to machinery or plant used for mineral exploration etc.) shall be omitted.

(8) In this section—

• "new expenditure" means, subject to Schedule 14 to this Act, expenditure incurred on or after 1st April 1986;

• "old expenditure" means expenditure which is not new expenditure; and

• "trade of mineral extraction" has the meaning assigned to it by paragraph 1 of Schedule 13 to this Act.

(9) In consequence of and in connection with the provisions of this section and Parts I to IV of Schedule 13, the amendments in Part V of that Schedule shall have effect.