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Capital Allowances Act 2001

Section 161: Pre-trading expenditure on mineral exploration and access

602.This section is based on section 63 of CAA 1990. It allows pre-trading expenditure on plant or machinery used for mineral exploration and access to be brought into the pool at cost when the trade commences.

603.There is a minor change in subsection (4)(a). In section 63(1)(a) of CAA 1990 there is no explicit requirement that the expenditure has to be capital expenditure on the provision of plant or machinery. See Change 25 in Annex 1.

604.This section is referred to in section 13(7). This is because this section overrides the general rule for plant and machinery which is used before it is brought into use for a qualifying activity. The general rule in section 13(3) and (4) would operate to bring the plant or machinery into the pool at the lower of cost or market value.

605.R&D allowances (see Part 6) are available for some types of pre-trading expenditure on mineral exploration and access. Oil and gas exploration and appraisal is treated as “research and development” by section 437(2)(b).

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