Part 5

Mineral extraction allowances
Chapter 3

Qualifying expenditure on acquiring a mineral asset

Qualifying expenditure on acquiring a mineral asset
403
1
Expenditure on acquiring a mineral asset is qualifying expenditure if—
a
it is capital expenditure, and
b
it is incurred for the purposes of a mineral extraction trade.
2
Subsection (1) is subject to—
- section 404 (exclusion of undeveloped market value of land), and
- section 406 (reduction where premium relief previously allowed).
2A
For the purposes of this section the reference to expenditure on acquiring a mineral asset does not include expenditure incurred on the restoration of a relevant site (within the meaning of section 416 or 416ZA).
3
In this Chapter “the buyer”, in relation to the acquisition of a mineral asset, means the person acquiring it.

Exclusion of undeveloped market value of land
404
1
If the mineral asset is an interest in land, so much of the buyer’s expenditure on acquiring the asset as is equal to the undeveloped market value of the interest is not qualifying expenditure.
2
“The undeveloped market value of the interest” means the amount that, at the time of the acquisition, the interest might reasonably be expected to fetch on a sale in the open market on the assumptions in subsection (3).
3
The assumptions are that—
a
there is no source of mineral deposits on or in the land, and
b
it will only ever be lawful to carry out existing permitted development.
4
Development is existing permitted development if at the time of the acquisition—
a
it has been, or had begun to be, lawfully carried out, or
b
it could be lawfully carried out under planning permission granted by a general development order.
5
In applying subsection (4) in relation to land outside the United Kingdom—
a
whether, at the time of the acquisition, development has been, or had begun to be, lawfully carried out is to be determined according to the law of the territory in which the land is situated, and
b
whether, at that time, development could be lawfully carried out under planning permission granted by a general development order is to be determined as if the land were in England.
6
References in this section to the time of acquisition are not affected by section 434 (expenditure incurred before trade carried on).
7
This section does not apply to the buyer’s expenditure if an election under section 569 (election to treat sale as being for alternative amount) is made in relation to the acquisition.

Qualifying expenditure where buildings or structures cease to be used
405
1
This section applies if—
a
section 404 (exclusion of undeveloped market value of land) applies to limit the buyer’s qualifying expenditure on acquiring the mineral asset,
b
the undeveloped market value of the interest in land includes the value of any buildings or structures on the land, and
c
at the time of the acquisition, or at any later time, the buildings or structures permanently cease to be used for any purpose.
2
The buyer is to be treated—
a
as having incurred qualifying expenditure, on acquiring a mineral asset, of an amount equal to the unrelieved value of the buildings or structures, and
b
as having incurred it when the buildings or structures permanently cease to be used for any purpose.
3
The unrelieved value of the buildings or structures is—
V - (A - B)
where—V is the value of the buildings or structures at the date of the acquisition (disregarding any value properly attributable to the land on which they stand),A is the amount of any allowances made to the buyer under the provisions of this Act other than Part 10 (assured tenancy allowances) in respect of—(a) the buildings or structures, or(b) assets in the buildings or structures, andB is the amount of any balancing charges made on the buyer under those provisions in respect of those buildings or structures or assets in them.
4
References in this section to the time of acquisition are not affected by section 434 (time when expenditure incurred).

Reduction where premium relief previously allowed
406
1
This section applies if—
a
the mineral asset is or includes an interest in land, and
b
for chargeable periods previous to the chargeable period for which the buyer first becomes entitled to an allowance under this Part in respect of the expenditure on acquiring the mineral asset, deductions are made under sections 60 to 67 of ITTOIA 2005 or under sections 62 to 67 of CTA 2009 (deductions in calculating trading profits where premiums etc. taxable).
2
The amount of the expenditure on the acquisition of the mineral asset that is qualifying expenditure is reduced by—
Dx E/T
where—
D is the total of the deductions made under sections 60 to 67 of ITTOIA 2005 or under sections 62 to 67 of CTA 2009 in the earlier chargeable periods mentioned in subsection (1)(b),
E is the amount of the capital expenditure on the acquisition of the interest in land that would have been qualifying expenditure if the buyer had been entitled to allowances under this Part in those earlier periods, and
T is the total amount of the capital expenditure on the acquisition of the interest in land.
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
Words in s. 406(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 561(2) (with Sch. 2 )
Words in s. 406(2) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5) , s. 883(1) , Sch. 1 para. 561(3) (with Sch. 2 )
Words in s. 406(1)(b) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 508(2) (with Sch. 2 Pts. 1, 2)
Words in s. 406(2) substituted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 508(3) (with Sch. 2 Pts. 1, 2)
S. 403(2A) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(3)