Section 412: Transfers of mineral assets within group: limit is initial group expenditure
1426.This section is based on part of section 117 of CAA 1990. It prevents an increase of qualifying expenditure on a mineral asset through a transfer between companies under common control.
1427.This is done by limiting the acquiring company’s capital expenditure on acquiring the mineral asset to the selling company’s capital expenditure on acquiring that mineral asset. This restriction is wider, in one sense, than the restriction in section 411 because this restriction applies even if a previous trader has not owned the mineral asset. Both restrictions can apply to the same acquisition.
Example
Assume that parent company A sells a mineral asset (originally bought for £500) to its subsidiary B for its then market value of £1000.
This section limits B’s capital expenditure to £500 – but it may not all be qualifying expenditure because other restrictions in Chapter 3 or 4 may apply.
1428.Subsection (2), in referring to “just and reasonable apportionment”, is a minor change. See Change 40 in Annex 1.
1429.Subsection (5) modifies the application of section 404 so that, broadly, the undeveloped market value of land is computed at the time the group first acquired the mineral asset. This is because the group’s capital expenditure is effectively limited to the capital expenditure that the group incurred (ignoring group transfers) on acquiring the mineral asset.
1430.Subsections (6) and (7) make corresponding modifications of section 405 if subsection (5) has applied. They put the buyer in broadly the same position as if the buyer had owned the interest in land from the time that it was purchased by the first group company.
