Example
Assume that in the example in paragraph 1398 above:
£50 of the £200 (that the land would be worth without the mineral deposits) is attributable to a building on the land;
B gets no capital allowances in relation to that building; and
the building becomes permanently disused by reason of B demolishing it.
This section allows the £50 to be qualifying expenditure.
Section 406: Reduction where premium relief previously allowed
1403.This section is based on section 111 of CAA 1990. It reduces acquisition expenditure to the extent that relief on it has already been obtained under the lease premium rules in section 87 of ICTA. This prevents double relief for the same expenditure.
Chapter 4: Qualifying expenditure: second-hand assets
Overview
1404.This Chapter treats, in certain cases, expenditure on a mineral asset as if it were expenditure on mineral exploration and access. The rate at which allowances are given for qualifying expenditure on mineral exploration and access is higher than for qualifying expenditure on a mineral asset. In certain cases the Chapter also limits, by reference to the position of previous owners of the asset, qualifying expenditure on acquiring an asset.
1405.Section 407 treats part of the cost of a mineral asset as qualifying expenditure on mineral exploration and access if part of the value of the mineral asset is attributable to expenditure of “the previous trader” on mineral exploration and access.
1406.Section 408 reduces, in certain cases, the cost of an interest in an oil licence acquired from someone who was not a mineral extraction trader. Some of the reduction may be treated as qualifying expenditure on mineral exploration and access.
1407.Section 409 limits qualifying expenditure on an asset if it represents expenditure on mineral exploration and access incurred by a seller who was not a mineral extraction trader.
1408.Section 410 limits qualifying expenditure if the mineral asset is an interest in a UK oil licence.
1409.Section 411 limits qualifying expenditure if a “previous trader” has owned the asset concerned. The limit is to the previous traders unrelieved residue of expenditure.
1410.Section 412 and section 413 prevent “groups” from increasing the capital expenditure on a mineral asset by means of intra-group transfers.
Section 407: Acquisition of mineral asset owned by previous trader
1411.This section is based on section 115 and parts of sections 113 and 114 of CAA 1990. There is a minor change in subsection (1)(a) as in sections 400 and 403 (paragraphs 1381 and 13961396 above). See Change 47 in Annex 1.
1412.Subsection (5)(a) treats part of the trader’s expenditure on acquiring the mineral asset as qualifying expenditure on mineral exploration and access in those cases if this section applies.
1413.Subsection (5)(b) makes a corresponding reduction to the trader’s expenditure on acquiring the mineral asset.
