Capital Allowances Act 2001

Chapter 2 Qualifying expenditure on mineral exploration and access

400 Qualifying expenditure on mineral exploration and access

(1) Expenditure on mineral exploration and access is qualifying expenditure if—

(a) it is capital expenditure, and

(b) it is incurred for the purposes of a mineral extraction trade.

(2) Expenditure on mineral exploration and access incurred by a person in connection with a mineral extraction trade which that person carries on then or subsequently is to be treated as incurred for the purposes of that trade.

(3) But pre-trading expenditure on mineral exploration and access is qualifying expenditure only to the extent provided by—

• section 401 (pre-trading exploration expenditure), or

• section 402 (pre-trading expenditure on plant or machinery).

(4) Any pre-trading expenditure that is qualifying expenditure under either of those sections is to be treated as incurred on the first day of trading.

(5) In this Chapter—

(a) “pre-trading expenditure” means capital expenditure incurred before the day on which a person begins to carry on a mineral extraction trade, and

(b) “the first day of trading”, in relation to a person’s pre-trading expenditure, means the day on which that person begins to carry on the mineral extraction trade.

401 Pre-trading exploration expenditure

(1) This section applies if—

(a) a person incurs pre-trading expenditure on mineral exploration and access at a source, and

(b) the expenditure is not incurred on the provision of plant or machinery.

(2) The amount of the expenditure (“pre-trading exploration expenditure”) that is qualifying expenditure depends on whether mineral exploration and access is continuing at the source on the first day of trading.

(3) If it is, so much of the pre-trading exploration expenditure as exceeds any relevant receipts is qualifying expenditure.

(4) If it is not, only so much of the pre-trading exploration expenditure as—

(a) was incurred within 6 years ending on the first day of trading, and

(b) exceeds any relevant receipts,

is qualifying expenditure.

(5) “Relevant receipts” means capital sums received—

(a) by the person incurring the pre-trading exploration expenditure referred to in subsection (3) or (4), and

(b) before the first day of trading,

so far as they are reasonably attributable to that expenditure.

402 Pre-trading expenditure on plant or machinery

(1) This section applies if—

(a) a person incurs pre-trading expenditure on the provision of plant or machinery for mineral exploration and access,

(b) the plant or machinery was used in connection with mineral exploration and access at a source, and

(c) before the first day of trading, the plant or machinery is sold, demolished, destroyed or abandoned.

(2) The amount of the expenditure (“pre-trading expenditure on plant or machinery”) that is qualifying expenditure depends on whether mineral exploration and access is continuing at the source on the first day of trading.

(3) If it is, so much of the pre-trading expenditure on plant or machinery as exceeds any relevant receipts is qualifying expenditure.

(4) If it is not, only so much of the pre-trading expenditure on plant or machinery as—

(a) was incurred within 6 years ending on the first day of trading, and

(b) exceeds any relevant receipts,

is qualifying expenditure.

(5) “Relevant receipts” means—

(a) if the plant or machinery is sold, the net proceeds to the person of the sale;

(b) if the plant or machinery is demolished or destroyed, the net amount received by the person for the remains of the plant or machinery, together with—

(i) any insurance money received by him in respect of the demolition or destruction, and

(ii) any other compensation of any description so received, so far as it consists of capital sums;

(c) if the plant or machinery is abandoned—

(i) any insurance money received by the person in respect of the abandonment, and

(ii) any other compensation of any description so received, so far as it consists of capital sums.