Chapter 6: Allowances and charges
Overview
1444.This Chapter deals with allowances and charges on qualifying expenditure. There is no pooling of qualifying expenditure. Allowances may be balancing allowances or writing-down allowances. Writing-down allowances are given on a reducing-balance basis at rates of 10% on mineral asset expenditure and 25% in other cases. Disposal receipts may arise in respect of qualifying expenditure on the happening of certain events. Disposal receipts either restrict the allowances on that qualifying expenditure or result in balancing charges to recover excessive allowances. Balancing allowances are available on different kinds of qualifying expenditure in different circumstances.
1445.Section 417 sets out whether an allowance is available or a charge will be made for a chargeable period.
1446.Section 418 quantifies the allowance or charge.
1447.Section 419 defines the term “UQE” used in the previous two sections.
1448.Section 420 defines the term “disposal receipt” used in the earlier sections in terms of a “disposal value” to be brought into account.
1449.Section 421 and section 422 provide for the circumstances in which, and the chargeable period for which, a disposal value is to be brought into account in relation to qualifying expenditure.
1450.Section 423 and section 424 deal with the amount of a disposal value to be brought into account.
1451.Section 425 deals with an additional case, the receipt of a capital sum, in which a disposal value is brought into account in relation to qualifying expenditure.
1452.Sections 426 to 431 set out the periods in which a balancing allowance is available in relation to different kinds of qualifying expenditure.
Section 417: Determination of entitlement or liability
1453.This section is based on section 98(2) and (3) and section 100(1) of CAA 1990. It determines whether, in respect of qualifying expenditure, there is entitlement to an allowance or liability to a charge in a chargeable period. It is similar to section 55 in Part 2.
1454.There is no equivalent of sections 53 and 54 because qualifying expenditure is not pooled in this Part. The main factor common to the calculation of allowances in Part 2 is that writing-down allowances in this Part are also computed by applying a percentage to an amount which reduces from one chargeable period to the next – known as the reducing-balance basis.
1455.The meaning of “UQE” and “TDR” and when balancing allowances may be due are dealt with in detail later in the Chapter.
Section 418: Amount of allowances and charges
1456.This section is based on section 98(4) to (6) and section 100(2) and (3) of CAA 1990. It is similar to section 56. It determines the amount of entitlement or charge.
1457.Subsection (4) caps balancing charge(s) in respect of qualifying expenditure at the amount of allowances actually given on that qualifying expenditure. This can be expressed more directly than in Part 2 because pooling is not involved in calculating allowances and charges in this Part.
1458.Subsection (6) permits a person to claim less than the full amount of the allowance. See Change 38 in Annex 1.
Section 419: Unrelieved qualifying expenditure
1459.This section is based on section 98(2) and (3) of CAA 1990.
Section 420: Meaning of “disposal receipt”
1460.This section provides a signpost to the provisions in this Part and elsewhere that deal with this term. “Disposal receipts” are the amount of disposal value that the mineral extraction trader is required to bring into account and they feed into the three earlier sections dealing with entitlement/liability, amount and “UQE” respectively.
Section 421: Disposal of, or ceasing to use, asset
1461.This section is based on section 99(1) of CAA 1990. It requires a disposal value to be brought into account on an asset being disposed of or permanently ceasing to be used for the purposes of the mineral extraction trade.
Section 422: Use of asset otherwise than for permitted development etc.
1462.This section is based on section 99(1) and (2) and section 110(3) of CAA 1990. It requires a disposal value to be brought into account if certain developments occur. This can happen without the mineral asset being disposed of or permanently ceasing to be used for the purposes of the mineral extraction trade.
1463.There is a minor change. Subsection (4)(b) contains a test by reference to general development orders in England. Section 110(3)(b) of CAA 1990 refers to Wales as well. This change has no practical effect at present. See Change 48 in Annex 1.
Section 423: Sections 421 and 422: amount of disposal value to be brought into account
1464.This section is based on section 99(3) and section 26(1) of CAA 1990. It gives the amount of the disposal value to be brought into account if one of the previous two sections applies.
1465.CAA 1990 leaves readers to adapt section 26 of that Act for the purposes of section 99(1) of that Act. It is clear that not all of section 26 is relevant to section 99(1) but it could be time consuming to arrive at the necessary adaptations.
1466.This section contains a Table setting out the disposal value so that reference to provisions in Part 2 and adaptations are not required in this Act.
1467.Item 2 of the Table is based on section 99(3) of CAA 1990. It refers to the disposal value as market value at the time of sale. See Note 17 in Annex 2.
Section 424: Disposal value restricted in case of interest in land
1468.This section is based on sections 99(3), 110 and 112 of CAA 1990. It excludes the undeveloped market value of land in arriving at its disposal value. This is because the undeveloped market value of land is excluded from qualifying expenditure when an interest in land is acquired.
1469.There is a minor change. Subsection (5)(b) contains a test by reference to general development orders in England whereas section 110(3)(b) of CAA 1990 refers to Wales as well. This change has no practical effect at present. See Change 48 in Annex 1.
Section 425: Receipt of capital sum
1470.This section is based on section 99(4) of CAA 1990. It requires capital sums, reasonably attributable to qualifying expenditure, to be brought into account as disposal values.
1471.Subsection (3) stops a capital sum from being taken into account twice.
Section 426: Pre-trading expenditure
1472.This section is based on section 101(5) of CAA 1990. It sets out the qualifying expenditure concerned and the chargeable period in which any allowance in respect of it will be a balancing allowance.
1473.The qualifying expenditure is pre-trading expenditure on mineral exploration and access if, before the trade began, the mineral exploration and access permanently ceased at the source concerned. The chargeable period is the one in which the trade begins.
Sections 427 to 431
1474.These sections are based on sections 99(1), 101 and 161(2) of CAA 1990. They provide other circumstances in which a person is entitled to a balancing allowance for the qualifying expenditure concerned.
