Part 5

Mineral extraction allowances
Chapter 1

Introduction

Mineral extraction allowances
394
1
Allowances are available under this Part if a person carries on a mineral extraction trade and incurs qualifying expenditure.
2
In this Part “mineral extraction trade” means a trade which consists of, or includes, the working of a source of mineral deposits but to the extent only that the profits or gains from that trade are, or (if there were any) would be, chargeable to tax.
2A
If a company or partnership is as a result of section 6D (
NI
rate activity treated as separate trade) treated for the purposes of this Act as carrying on two separate trades, each of them is for the purposes of this Part to be treated as a mineral extraction trade if the separate trades would together be so treated.
3
In this Part “mineral deposits” includes any natural deposits capable of being lifted or extracted from the earth, and for this purpose geothermal energy is to be treated as a natural deposit.
4
Any reference in this Part to mineral deposits is to mineral deposits of a wasting nature.
5
In this Part “source of mineral deposits” includes a mine, an oil well and a source of geothermal energy.

Qualifying expenditure
395
1
In this Part “qualifying expenditure” means—
a
expenditure on mineral exploration and access which is qualifying expenditure under Chapter 2,
b
expenditure on acquiring a mineral asset which is qualifying expenditure under Chapter 3,
c
expenditure which is treated as qualifying expenditure on mineral exploration and access under section 407(5) or 408(2), and
d
expenditure which is qualifying expenditure under Chapter 5 (expenditure on works likely to become valueless and ... restoration expenditure).
But this is subject to subsections (2) and (3).
2
Expenditure is not qualifying expenditure if it is excluded from being qualifying expenditure by section 399.
3
Chapters 4 and 5 contain provisions limiting in certain cases the amount of expenditure which is qualifying expenditure.

Meaning of “mineral exploration and access”
396
1
In this Part “mineral exploration and access” means—
a
searching for or discovering and testing the mineral deposits of a source, or
b
winning access to such deposits.
2
Expenditure on seeking planning permission necessary to enable—
a
mineral exploration and access to be undertaken at any place, or
b
any mineral deposits to be worked,
is treated as expenditure on mineral exploration and access and not as expenditure on acquiring a mineral asset.
3
“Seeking planning permission” includes pursuing an appeal against a refusal to grant planning permission.

Meaning of “mineral asset”
397
In this Part “mineral asset” means—
a
any mineral deposits or land comprising mineral deposits, or
b
any interest in or right over such deposits or land.

Relationship between main types of qualifying expenditure
398
Subject to section 396(2) and Chapter 4, expenditure on—
a
the acquisition of, or of rights over, the site of a source of mineral deposits, or
b
the acquisition of, or of rights over, mineral deposits,
is to be treated as expenditure on acquiring a mineral asset and not as expenditure on mineral exploration and access.

Expenditure excluded from being qualifying expenditure
399
1
Expenditure on the provision of plant or machinery is not qualifying expenditure except as provided by section 402 (pre-trading expenditure on plant or machinery).
1A
Expenditure incurred by a person for the purposes of a mineral extraction trade is not qualifying expenditure if—
a
when the expenditure is incurred, the person is carrying on the trade but the trade is not at that time a mineral extraction trade, or
b
the person has not begun to carry on the trade when the expenditure is incurred and, when the person begins to carry on the trade, the trade is not a mineral extraction trade.
1B
Section 577(2) (references to commencement
etc
of a trade) does not apply to subsection (1A).
2
Expenditure on works constructed wholly or mainly for subjecting the raw product of a source to any process is not qualifying expenditure, unless the process is designed for preparing the raw product for use as such.
3
Expenditure on buildings or structures provided for occupation by, or for the welfare of, workers is not qualifying expenditure except as provided by section 415.
4
Expenditure on a building is not qualifying expenditure if the whole of the building was constructed for use as an office.
5
Subsection (6) applies if part of a building or structure has been constructed for use as an office.
6
The expenditure on the office part is not qualifying expenditure if it was more than 10% of the capital expenditure incurred on the construction of the whole.
Chapter 2

Qualifying expenditure on mineral exploration and access

Qualifying expenditure on mineral exploration and access
400
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.

Pre-trading exploration expenditure
401
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.

Pre-trading expenditure on plant or machinery
402
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.
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.
Chapter 4

Qualifying expenditure: second-hand assets

Assets reflecting expenditure on mineral exploration and access

Acquisition of mineral asset owned by previous trader
407
1
This section applies if—
a
a person carrying on a mineral extraction trade (“the buyer”) incurs capital expenditure on acquiring a mineral asset (“asset X”) for the purposes of that trade, and
b
the conditions in subsection (3) are met.
2
In this section “the buyer’s expenditure” means the expenditure referred to in subsection (1)(a), less any amount which, under section 404 (exclusion of undeveloped market value of land), is not qualifying expenditure on the acquisition of the mineral asset.
3
The conditions are that—
a
expenditure was previously incurred on acquiring asset X or bringing it into existence by—
i
the person from whom the buyer acquired asset X, or
ii
an earlier owner of asset X,
in connection with a mineral extraction trade carried on by the person incurring that expenditure,
b
part of the value of asset X is properly attributable to expenditure (“E1”) on mineral exploration and access by the previous trader, and
c
it is just and reasonable to attribute part of the buyer’s expenditure (“E2”) to that part of the value of asset X.
4
In arriving at E1, any expenditure that is or has been deducted in calculating, for tax purposes, the profits of a trade carried on by the previous trader must be excluded.
5
If this section applies—
a
so much of the buyer’s expenditure as is equal to the lesser of E1 and E2 is to be treated as qualifying expenditure on mineral exploration and access, and
b
the buyer’s expenditure on acquiring the mineral asset is reduced by the same amount.
6
“The previous trader” means—
a
the person incurring the expenditure mentioned in subsection (3)(a), or
b
if there has been more than one such person, the last before the buyer acquired asset X.
7
In this section references to asset X include—
a
two or more assets which together make up asset X, and
b
one asset from which, or two or more assets from the combination of which, asset X is derived.

Acquisition of oil licence from non-trader
408
1
This section applies if—
a
a person carrying on a mineral extraction trade (“the buyer”) incurs capital expenditure on acquiring an interest in an oil licence for the purposes of that trade,
b
the person from whom the interest was acquired (“the seller”) disposed of the interest without having carried on a mineral extraction trade,
c
part of the value of the interest is attributable to expenditure (“E1”) on mineral exploration and access by the seller, and
d
it is just and reasonable to attribute part of the buyer’s expenditure (“E2”) to that part of the value of the interest.
2
If this section applies—
a
so much of the buyer’s expenditure as is equal to the lesser of E1 and E2 is to be treated as qualifying expenditure on mineral exploration and access, and
b
the buyer’s expenditure on acquiring the interest in the oil licence is reduced by an amount equal to E2.
3
In this section “oil licence” and “interest in an oil licence” have the same meaning as in Chapter 3 of Part 12.

Acquisition of other assets from non-traders
409
1
This section applies if—
a
a person carrying on a mineral extraction trade (“the buyer”) incurs capital expenditure on acquiring any assets for the purposes of that trade,
b
the person from whom the assets were acquired (“the seller”) disposed of the assets without having carried on a mineral extraction trade,
c
the assets represent expenditure on mineral exploration and access incurred by the seller, and
d
section 408 (acquisition of oil licence from non-trader) does not apply in relation to the acquisition.
2
If this section applies, the buyer’s expenditure is qualifying expenditure only to the extent that it does not exceed the amount of the seller’s expenditure on mineral exploration and access that is represented by the assets.
3
The references in this section to assets representing expenditure on mineral exploration and access include any results obtained from any search, exploration or inquiry on which the expenditure was incurred.

Qualifying expenditure on assets limited by reference to historic costs

UK oil licence: limit is original licence payment
410
1
This section applies if a person carrying on a mineral extraction trade (“the buyer”) incurs capital expenditure on acquiring a mineral asset which is a UK oil licence, or an interest in such a licence, for the purposes of that trade.
2
If this section applies, the buyer’s expenditure is qualifying expenditure only to the extent that it does not exceed—
a
the original licence payment, or
b
if the mineral asset is an interest in a UK oil licence, such part of the original licence payment as it is just and reasonable to attribute to the interest.
3
In this section “the original licence payment” means the amount paid to the relevant authority for the purpose of obtaining the licence by the person to whom the licence was granted.
4
This section does not affect any expenditure that is treated as qualifying expenditure on mineral exploration and access under—
- section 407(5) (acquisition of mineral asset owned by previous trader), or
- section 408(2) (acquisition of oil licence from non-trader).
5
In this section “UK oil licence” and “the relevant authority” have the same meaning as in Chapter 3 of Part 12.

Assets generally: limit is residue of previous trader’s qualifying expenditure
411
1
This section applies if—
a
a person carrying on a mineral extraction trade (“the buyer”) incurs capital expenditure on acquiring an asset (“asset X”) for the purposes of that trade, and
b
expenditure was previously incurred on acquiring asset X or bringing it into existence by—
i
the person from whom the buyer acquired asset X, or
ii
an earlier owner of asset X,
in connection with a mineral extraction trade carried on by the person incurring that expenditure.
2
In this section “the buyer’s expenditure” means the expenditure referred to in subsection (1)(a) less any amount which, under section 404 (exclusion of undeveloped market value of land), is not qualifying expenditure on the acquisition of the mineral asset.
3
If this section applies, the buyer’s expenditure is qualifying expenditure only to the extent that it does not exceed the residue of the previous trader’s qualifying expenditure.
4
The residue of the previous trader’s qualifying expenditure is—
QE - (A - B)
where—QE is so much of the expenditure incurred by the previous trader on the acquisition or bringing into existence of asset X as constitutes qualifying expenditure for the purposes of this Part,A is the total of any allowances made under this Part in respect of the previous trader’s qualifying expenditure, andB is the total of any balancing charges made under this Part in respect of the previous trader’s qualifying expenditure.
5
“The previous trader” means—
a
the person incurring the expenditure mentioned in subsection (1)(b), or
b
if there has been more than one such person, the last before the buyer acquired asset X.
6
In this section references to asset X include—
a
two or more assets which together make up asset X, and
b
one asset from which, or two or more assets from the combination of which, asset X is derived.
7
For the purposes of subsection (4), if the previous trader incurred expenditure on the acquisition or bringing into existence of one or more assets from which asset X is derived, QE is so much of that expenditure as—
a
was qualifying expenditure for the purposes of this Part, and
b
is just and reasonable to attribute to asset X;
and a similar apportionment is to be made to arrive at A and B.
8
This section does not affect any expenditure that is treated as qualifying expenditure on mineral exploration and access under—
- section 407(5) (acquisition of mineral asset owned by previous trader), or
- section 408(2) (acquisition of oil licence from non-trader).

Transfers of mineral assets within group: limit is initial group expenditure
412
1
Subject to section 413, this section applies if—
a
a company (“the buyer”) incurs capital expenditure on acquiring a mineral asset (“asset X”) from another company (“the seller”), and
b
the seller is a group company in relation to the buyer at the time of the acquisition.
2
The buyer’s expenditure on acquiring asset X is to be left out of account for the purposes of this Part to the extent that it exceeds—
a
the capital expenditure incurred by the seller on acquiring asset X, or
b
if asset X is an interest or right granted by the seller in a mineral asset acquired by the seller (“asset Y”), so much of the capital expenditure incurred by the seller on asset Y as on a just and reasonable apportionment is referable to asset X.
3
If there is a sequence of acquisitions within subsection (1), apply subsection (2) in the same sequence (starting with the first acquisition in the sequence).
4
Subsections (5) to (7) apply if—
a
the buyer is carrying on a mineral extraction trade, and
b
the asset is an interest in land.
5
Section 404 (exclusion of undeveloped market value of land) applies to the buyer as if the time of the buyer’s acquisition of the interest in land were—
a
the time of the seller’s acquisition of the interest, or
b
if there is a sequence of acquisitions within subsection (1), the time when the interest was acquired by the company which is the seller in the first acquisition in the sequence.
6
Subject to subsection (7), section 405 (qualifying expenditure where buildings or structures cease to be used) applies to the buyer as if the time of the buyer’s acquisition of the interest in land were the time of the seller’s acquisition of the interest.
7
If there is a sequence of acquisitions within subsection (1), section 405 applies as if—
a
the time of the acquisition were the time when the interest was acquired by the company which is the seller in the first acquisition in the sequence, but
b
the allowances and balancing charges to be taken into account in calculating (under section 405(3)) the unrelieved value of the buildings or structures included any allowances or charges made to or on any seller in the sequence.

Transfers of mineral assets within group: supplementary
413
1
For the purposes of section 412, a company is a group company in relation to another company if—
a
it controls, or is controlled by, the other company, or
b
both companies are under the control of another person.
2
Section 412 does not apply if—
a
section 410 (UK oil licences: limit is original licence payment) applies to the acquisition, or
b
the acquisition is a sale in respect of which an election is made under section 569 (election to treat sale as being for an alternative amount).
3
Section 412 applies regardless of section 568 (sales between connected persons etc., or to obtain tax advantage, treated as at market value).
4
Section 412 does not affect any expenditure that is treated as qualifying expenditure on mineral exploration and access under—
- section 407(5) (acquisition of mineral asset owned by previous trader), or
- section 408(2) (acquisition of oil licence from non-trader).
Chapter 5

Other kinds of qualifying expenditure

Expenditure on works likely to become valueless
414
1
Expenditure is qualifying expenditure if—
a
it is capital expenditure on constructing works in connection with the working of a source of mineral deposits,
b
it is incurred for the purposes of a mineral extraction trade, and
c
the works—
i
are likely to be of little or no value, when the source is no longer worked, to the last person working the source, or
ii
if the source is worked under a foreign concession, are likely to become valueless, when the concession ends, to the last person working the source under the concession.
2
For the purposes of subsection (1), expenditure on constructing works does not include expenditure on acquiring the site of the works or any right in or over the site.
3
In subsection (1)(c) “foreign concession” means a right or privilege granted by the government of, or any municipality or other authority in, a territory outside the United Kingdom.

Contribution to buildings or works for benefit of employees abroad
415
1
Subject to subsection (3), expenditure is qualifying expenditure if—
a
it is incurred by a person carrying on a mineral extraction trade outside the United Kingdom and for the purposes of that trade,
b
it is a contribution consisting of a capital sum to the cost of buildings or works to which this section applies, and
c
the buildings or works are likely to be of little or no value, when the source is no longer worked, to the last person working the source.
2
The buildings or works to which this section applies are—
a
buildings to be occupied by persons employed at or in connection with the working of a source outside the United Kingdom;
b
works for the supply of water, gas or electricity wholly or mainly to buildings occupied or to be occupied by persons so employed;
c
works to be used to provide other services or facilities wholly or mainly for the welfare of persons so employed or their dependants.
3
Expenditure is not qualifying expenditure if the person making the contribution—
a
acquires an asset as a result of the expenditure, or
b
is entitled to an allowance for the expenditure under any other provision of the Tax Acts.

Non-ring fence trades: expenditure on restoration within 3 years of ceasing to trade
416
1
If—
a
a person who has ceased to carry on a relevant mineral extraction trade incurs expenditure on the restoration of a relevant site, and
b
the expenditure is incurred within 3 years from the last day of trading and meets the further conditions in subsection (3),
the net cost of the restoration is qualifying expenditure.
2
The qualifying expenditure is treated as incurred on the last day of trading.
3
The further conditions are that the expenditure—
a
has not been deducted in calculating for tax purposes the profits of any trade carried on by that person, and
b
would have been—
i
deductible in calculating the profits of the trade, or
ii
capable of being qualifying expenditure under this Chapter,
if the expenditure had been incurred while the trade was being carried on.
4
If any expenditure incurred by a person is qualifying expenditure under this section—
a
the whole of the expenditure on the restoration (not just the net cost) is not deductible in calculating the person’s income for any tax purposes, and
b
none of the amounts subtracted to produce the net cost is to be treated as the person’s income for any tax purposes.
5
“Restoration” includes—
a
landscaping,
b
in relation to land in the United Kingdom, the carrying out of any works required as a condition of granting planning permission for development consisting of the winning and working of minerals, and
c
in relation to land outside the United Kingdom, the carrying out of any works required by any equivalent condition imposed under the law of the territory in which the land is situated.
But it does not include decommissioning any plant or machinery (within the meaning of section 163).
6
A “relevant site” means—
a
the site of a source to the working of which the relevant mineral extraction trade related, or
b
land used in connection with working such a source.
7
“The net cost of the restoration” means the expenditure incurred on the restoration less any amounts—
a
received within 3 years from the last day of trading, and
b
attributable to the restoration of the relevant site (for instance, amounts for spoil or other assets removed from the site or for tipping rights).
7A
Relevant mineral extraction trade” means a mineral extraction trade that is not a ring fence trade within the meaning of Part 8 of CTA 2010 (see section 277 of that Act).
8
All such adjustments are to be made, by way of discharge or repayment of tax or otherwise, as are necessary to give effect to this section.

Ring fence trades: expenditure on site restoration
416ZA
1
If—
a
a person who is carrying on, or has ceased to carry on, a ring fence trade incurs expenditure on the restoration of a relevant site,
b
that part of the restoration work to which the expenditure relates has been carried out, and
c
the expenditure has not been deducted in calculating for tax purposes the profits of any trade carried on by the person,
the net cost of the restoration is qualifying expenditure for the relevant period in which that part of the work to which the expenditure relates was carried out.
2
“
Relevant period
” means—
a
in the case of restoration work carried out while the person is carrying on the trade, a chargeable period, and
b
in the case of restoration work carried out after the person has ceased to carry on the trade, a notional accounting period.
For the meaning of “notional accounting period”, see section 416ZB.
3
The qualifying expenditure for a notional accounting period is treated as incurred on the last day of trading.
4
If the amount of expenditure incurred on any part of the restoration work carried out in a relevant period is disproportionate to that part of the restoration work, only so much of the net cost of the restoration as is proportionate to that part of the restoration work (the “allowable expenditure for the period”) is to be treated as qualifying expenditure for that period.
5
But subsection (4) does not prevent that part of the expenditure that is not allowable expenditure for the period from being treated as qualifying expenditure for a subsequent relevant period.
6
If any expenditure incurred by a person is qualifying expenditure under this section—
a
the whole of the expenditure on the restoration (not just the net cost) is not deductible in calculating the person's income for any tax purposes, and
b
none of the amounts subtracted to produce the net cost is to be treated as the person's income for any tax purposes.
7
“
Restoration
” includes—
a
landscaping,
b
in relation to land in the United Kingdom, the carrying out of any works required as a condition of granting planning permission for development relating to the winning of oil from an oil field,
c
in relation to land in the
UK
marine area, the carrying out of any works required in order to comply with—
i
an approved abandonment programme,
ii
a condition to which the approval of an abandonment programme is subject, or
iii
a requirement imposed by the Secretary of State, or an agreement made with the Secretary of State, in relation to a relevant site, and
d
in relation to land in a foreign sector of the continental shelf, the carrying out of any works required in order to comply with anything corresponding to a matter within paragraph (c)(i), (ii) or (iii) under the law of a territory outside the United Kingdom.
But it does not include decommissioning any plant or machinery (within the meaning of section 163).
8
A “
relevant site
” means—
a
the site of a source to the working of which the ring fence trade relates (or related), or
b
land used in connection with working such a source.
9
“
The net cost of the restoration
” means the expenditure incurred on the restoration less any amounts that—
a
are received, or are to be received, by the person, and
b
are attributable to the restoration of the relevant site.
10
All such adjustments are to be made, by way of discharge or repayment of tax or otherwise, as are necessary to give effect to this section.
11
In this section—
- “abandonment programme”, “approval” and “approved” (in relation to an abandonment programme) have the same meaning as in Part 4 of the Petroleum Act 1998,
- “
foreign sector of the continental shelf
” means an area within which rights are exercisable with respect to the sea bed and subsoil and their natural resources by a territory outside the United Kingdom,
- “
oil
” and “
oil field
” have the same meaning as in Part 1 of
OTA
1975,
- “
ring fence trade
” has the same meaning as in Part 8 of CTA 2010 (see section 277 of that Act), and
- “
UK
marine area
” has the meaning given by section 42 of the Marine and Coastal Access Act 2009.

“Notional accounting period”
416ZB
1
For the purposes of section 416ZA “
notional accounting period
”, in relation to a person (“the former trader”) who has ceased to carry on a ring fence trade, means each of the following periods—
a
the period that—
i
begins with the day following the last day on which the former trader carried on the ring fence trade, and
ii
ends with the day on which the first termination event subsequently occurs, and
b
each period that—
i
begins with the day following the last day of a period determined under paragraph (a) or this paragraph, and
ii
ends with the day on which the first termination event subsequently occurs.
2
But there are to be no notional accounting periods after the end of the post-cessation period (see subsection (4)).
3
“
Termination event
”, in relation to a notional accounting period, means each of the following—
a
the end of the period of 12 months beginning with the first day of the notional accounting period,
b
the occurrence of an accounting date of the former trader or, if there is a period for which the former trader does not make up accounts, the end of that period (but see subsections (6) and (7)), and
c
the end of the post-cessation period.
4
“
The post-cessation period
” means the period that—
a
begins with the day following the last day on which the former trader carried on the ring fence trade, and
b
ends with the day on which the appropriate authority is satisfied that the restoration of the relevant site has been completed.
5
In subsection (4) “
the appropriate authority
” means—
a
in the case of restoration falling within section 416ZA(7)(c), the Secretary of State, and
b
in any other case, such person or body as the Commissioners for Her Majesty's Revenue and Customs may specify.
6
If the former trader—
a
carries on more than one trade,
b
makes up accounts of any of them to different dates, and
c
does not make up general accounts for the whole of the former trader's activities,
subsection (3)(b) applies with reference to the accounting date of such one of the trades as the former trader may determine.
7
If the Commissioners for Her Majesty's Revenue and Customs are of the opinion, on reasonable grounds, that a date determined by the former trader for the purposes of subsection (6) is inappropriate, the Commissioners may by notice direct that the accounting date of such other of the trades referred to in that subsection as appears to the Commissioners to be appropriate is to be used instead.
8
Expressions used in this section and in section 416ZA have the same meaning in this section as they do in that section.

Site restoration services supplied by connected person
416ZC
1
Where—
a
a person (“R”) who is carrying on, or has ceased to carry on, a ring fence trade enters into an arrangement,
b
under the arrangement, a person (“S”) who is connected with R provides a service to R in connection with work on the restoration of a relevant site, and
c
(in the absence of this section) all or part of the consideration for the service would be qualifying expenditure of R under section 416ZA,
the amount of the expenditure which is qualifying expenditure is restricted under section 416ZD(1).
2
Subsection (1)(b) may be satisfied whether the service is provided to R directly or indirectly; and in particular it does not matter—
a
whether R and S are parties to the same contract, or
b
whether payments are made by R directly to S.
3
Subsections (4) and (5) apply for the purposes of this section and sections 416ZD and 416ZE.
4
“
Relevant site
” has the meaning given by section 416ZA(8).
5
References to providing a service include—
a
letting a ship on charter or any other asset on hire, and
b
providing goods which are to be used up in the course of providing a service.

Restriction on allowance available
416ZD
1
In determining how much of the consideration for the service is qualifying expenditure, there is to be left out of account the amount (if any) by which that consideration exceeds D.
2
D is the cost to S of providing the service or, if the qualifying expenditure relates to only part of the service, that part.
3
Subsection (2) is subject to—
a
subsection (4), and
b
section 416ZE,
which provide for D to be calculated differently in certain circumstances.
4
The following provisions apply in relation to an amount restricted under subsection (1) as they apply in relation to an amount restricted under section 165B(1)—
a
section 165C;
b
section 165E, subject to the modifications in subsection (5).
5
The modifications are that—
a
the references to Part 2 are to be read as references to this Part,
b
in subsection (1)(c), the reference to decommissioning expenditure is to be read as a reference to qualifying expenditure under section 416ZA, and
c
in subsection (5), the reference to R's available qualifying expenditure is to be read as a reference to R's qualifying expenditure on the restoration of the site.
6
But if, under the arrangement, a particular service or part of a service is provided by more than one person who is connected with R (so that without this subsection there would be more than one amount for D in relation to that service or part), D is the lowest of those amounts.

Allowance where site restoration undertaken for other participators in oil field
416ZE
1
This section applies where—
a
S carries out the restoration of a relevant site,
b
there are, in addition to R, one or more other participators in the relevant field, and
c
the expenditure incurred in carrying out the restoration is apportioned between the participators (including R) in accordance with their shares in the oil won from the relevant field or their shares in the equity of that field.
2
D is the part of the expenditure referred to in subsection (1)(c) which is incurred by R.
3
Where—
a
a relevant site has been used in connection with the winning of oil from more than one relevant field, and
b
the expenditure incurred in respect of the restoration is apportioned between those fields in accordance with the contribution from each field to the total of the oil won using that site,
subsections (1) and (2) apply to each such field as if subsection (1)(c) referred to the expenditure apportioned to that field.
4
But subsections (2) and (3) do not apply (and section 416ZD(2) applies instead) if—
a
the amount of consideration, or the method of determining the amount of consideration, to be received by S under the arrangement or arrangements, or
b
the apportionment of the liability for that consideration (whether between the participators as mentioned in subsection (1)(c) or between the fields as mentioned in subsection (3)(b)),
has been agreed as, or as part of, an avoidance scheme.
5
A scheme is an “avoidance scheme” if the main purpose, or one of the main purposes, of a party in entering into the scheme is to enable a person to obtain a tax advantage under this Part that would not otherwise be obtained.
6
The reference in subsection (5) to obtaining a tax advantage that would not otherwise be obtained includes obtaining an allowance that is in any way more favourable to a person than the one that would otherwise be obtained.
7
In relation to the restoration of a relevant site, “
relevant field
” means any of the following—
a
the oil field in which the site is located;
b
if the site is the site of a source to the working of which a ring fence trade relates (or related), an oil field from which oil is or has been won by means of working the source;
c
if the site is land used in connection with working such a source, an oil field from which oil is or has been won by means of working the source.
8
In this section—
- “
licensee
”, “
oil
” and “
oil field
” have the same meaning as in Part 1 of
OTA
1975, and
- “
other participator
” means a person, not connected with R, who is a licensee in respect of any licensed area wholly or partly included in the oil field in question.
Chapter 5A

First-year qualifying expenditure

General

First-year allowances available for certain types of qualifying expenditure
416A
A first-year allowance is not available unless the qualifying expenditure is first-year qualifying expenditure under section 416B (expenditure incurred wholly for purposes of a ring fence trade).

Types of expenditure which may qualify for first year allowances

Expenditure incurred by company for purposes of a ring fence trade
416B
1
Expenditure is first-year qualifying expenditure if—
a
it is incurred on or after 17th April 2002,
b
it is incurred by a company,
c
it is incurred wholly for the purposes of a ring fence trade, and
d
it is not excluded by—
i
subsection (2) (acquisition of mineral asset), or
ii
subsection (3) (acquisition of asset representing expenditure of connected company).
2
Expenditure is not first-year qualifying expenditure under this section if it is expenditure on acquiring a mineral asset
(within the meaning of section 403)
.
3
Expenditure is not first-year qualifying expenditure under this section if it is expenditure incurred by a company on the acquisition of an asset representing expenditure incurred by a company connected with that company.
4
To the extent that references in this section to an asset representing expenditure incurred by a company include a reference to an asset representing expenditure on mineral exploration and access, they also include a reference to any results obtained from any search, exploration or inquiry on which any such expenditure was incurred.
5
In this section “
ring fence trade
” means a ring fence trade in respect of which tax is chargeable under
section 330(1) of CTA 2010
(supplementary charge in respect of ring fence trades).

Supplementary

Time when expenditure is incurred
416C
1
In determining whether expenditure is first-year qualifying expenditure under this Chapter, any effect of the provisions specified in subsection (2) on the time at which the expenditure is to be treated as incurred is to be disregarded.
2
The provisions are—
a
section 400(4) (which treats certain pre-trading expenditure as incurred on the first day of trading), and
b
section 434 (which treats certain other expenditure incurred for the purposes of a trade about to be carried on as incurred on that day).
Chapter 6

Allowances and charges

First-year allowances

First-year allowances
416D
1
A person is entitled to a first-year allowance in respect of first-year qualifying expenditure if the expenditure is incurred in a chargeable period to which this Act applies.
2
Any first-year allowance is made for the chargeable period in which the first-year qualifying expenditure is incurred.
3
The amount of the allowance is a percentage of the first-year qualifying expenditure in respect of which the allowance is made, as shown in the Table—
Table
Amount of first-year allowances
Type of first-year qualifying expenditure | Amount
Expenditure qualifying under section 416B (expenditure incurred wholly for the purposes of a ring fence trade) | 100%
4
A person who is entitled to a first-year allowance may claim the allowance in respect of the whole or a part of the first-year qualifying expenditure.
5
This section is subject to section 416E (artificially inflated claims for first-year allowances).

Artificially inflated claims for first-year allowances
416E
1
To the extent that a transaction is attributable to arrangements entered into wholly or mainly for a disqualifying purpose, it shall be disregarded in determining for a chargeable period the amount of any first-year allowance to which a person is entitled.
2
For the purposes of this section, arrangements are entered into wholly or mainly for a “
disqualifying purpose
” if their main object, or one of their main objects, is to enable a person to obtain—
a
a first-year allowance to which he would not otherwise be entitled, or
b
a first-year allowance of a greater amount than that to which he would otherwise be entitled.
3
In this section “
arrangements
” includes any scheme, agreement or understanding, whether or not legally enforceable.

Writing-down and balancing allowances and balancing charges

Determination of entitlement or liability
417
1
Whether a person who has incurred qualifying expenditure is entitled to a writing-down allowance or a balancing allowance, or liable to a balancing charge, for a chargeable period depends on—
a
how much of the expenditure is unrelieved qualifying expenditure for that period (“UQE”), and
b
the total of any disposal receipts to be brought into account for that period (“TDR”) by reference to the expenditure.
2
If UQE exceeds TDR, the person is entitled to a writing-down allowance or a balancing allowance for the period.
3
If TDR exceeds UQE, the person is liable to a balancing charge for the period.
4
The entitlement under subsection (2) is to a writing-down allowance except in cases for which sections 426 to 431 provide for the entitlement to be to a balancing allowance.

Amount of allowances and charges
418
1
The amount of the writing-down allowance to which a person is entitled for any chargeable period in respect of qualifying expenditure is—
a
in the case of qualifying expenditure on the acquisition of a mineral asset, 10% of the amount by which UQE exceeds TDR;
b
in the case of other qualifying expenditure, 25% of the amount by which UQE exceeds TDR.
2
If the chargeable period is more or less than a year, the amount of the writing-down allowance is proportionately increased or reduced.
3
If the mineral extraction trade has been carried on for part only of the chargeable period, the amount of the writing-down allowance is proportionately reduced.
4
The amount of the balancing charge to which a person is liable for a chargeable period in respect of qualifying expenditure is—
a
the amount by which TDR exceeds UQE, or
b
if less, the allowances for earlier chargeable periods in respect of the expenditure less the total of any balancing charges for those periods in respect of the expenditure.
Where a person is liable to a balancing charge in respect of first-year qualifying expenditure for the chargeable period in which he incurred the expenditure, any first-year allowance made in respect of the expenditure shall be treated for the purposes of paragraph (b) as if it were an allowance for an earlier chargeable period.
5
The amount of the balancing allowance to which a person is entitled for a chargeable period in respect of qualifying expenditure is the amount by which UQE exceeds TDR.
6
A person claiming a writing-down allowance or a balancing allowance may require the allowance to be reduced to a specified amount.

Unrelieved qualifying expenditure

Unrelieved qualifying expenditure
419
1
A person’s unrelieved qualifying expenditure for the chargeable period in which the qualifying expenditure is incurred is
a
the whole of it, unless the expenditure is first-year qualifying expenditure, or
b
if the expenditure is first-year qualifying expenditure, none of it,
but paragraph (b) is subject to subsections (3) to (5).
2
A person’s unrelieved qualifying expenditure for a chargeable period after that in which the qualifying expenditure is incurred is the amount, if any, by which it exceeds the aggregate of—
a
the allowances made in respect of the expenditure for earlier chargeable periods, and
b
the total of any disposal receipts for earlier chargeable periods.
3
If, in the case of expenditure which is first-year qualifying expenditure, a disposal receipt falls to be brought into account for the chargeable period in which the expenditure is incurred (“
the initial period
”), subsection (4) below applies.
4
Where this subsection applies, the unrelieved balance of the expenditure shall be taken to be unrelieved qualifying expenditure for the initial period, but only for the purpose specified in subsection (5).
5
The purpose is that of determining in accordance with sections 417 and 418—
a
any question whether the person who incurred the expenditure—
i
is entitled to a balancing allowance for the initial period, or
ii
is liable to a balancing charge for that period, and
b
if so, the amount of that balancing allowance or balancing charge.
6
In this section “
the unrelieved balance of the expenditure
” means so much of the first-year qualifying expenditure in question as remains after deducting the amount of any first-year allowance given in respect of the whole or any part of that expenditure.

Unrelieved qualifying expenditure: entry to cash basis
419A
1
If a person carrying on a mineral extraction trade enters the cash basis for a tax year, for the purpose of determining the person's unrelieved qualifying expenditure for the chargeable period ending
in the tax year (or, if there is more than one such period, the latest of them)
and subsequent chargeable periods (see section 419), only the non-cash basis deductible portion of qualifying expenditure incurred before the chargeable period ending
in the tax year (or, if there is more than one such period, the latest of them)
is to be taken into account.
2
The “non-cash basis deductible portion” of qualifying expenditure means the amount of qualifying expenditure for which no deduction would be allowed in calculating the profits of the trade on the cash basis on the assumption that the expenditure was paid in the tax year for which the person enters the cash basis.
3
Subsections (9) and (11) of section 1A (capital allowances and charges: cash basis) apply for the purposes of this section as they apply for the purposes of that section.

Disposal values

Meaning of “disposal receipt”
420
In sections 417 to 419 “disposal receipt” means a disposal value that a person is required to bring into account in accordance with—
a
sections 421 to 425, or
b
section 614BS of ITA 2007 or section 918 of CTA 2010 (cases where expenditure taken into account under Part 2, 5 or 8 of this Act) or any other enactment.

Disposal of, or ceasing to use, asset
421
1
This section applies if—
a
a person has incurred qualifying expenditure on providing assets (including the construction of works), and
b
any of those assets—
i
is disposed of, or
ii
permanently ceases to be used by him for the purposes of a mineral extraction trade (whether because of the discontinuance of the trade or for any other reason).
2
The person is required to bring the disposal value of the asset into account for the chargeable period in which the disposal or cessation occurs.

Use of asset otherwise than for permitted development etc.
422
1
This section applies if—
a
a person has acquired a mineral asset,
b
at any time after the acquisition, the asset begins to be used (by him or another person) in a way which constitutes development, and
c
the development is not—
i
existing permitted development, or
ii
development for the purposes of a mineral extraction trade carried on by the person.
2
The person is required to bring the disposal value of the mineral asset into account for the chargeable period in which the use begins.
3
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.
4
In applying subsection (3) 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.

Sections 421 and 422: amount of disposal value to be brought into account
423
1
The disposal value to be brought into account under section 421 or 422 depends on the event requiring it to be brought into account, as shown in the Table—
Table
Disposal value for sections 421 and 422
1. Event | 2. Disposal value
1. Sale of the asset, except in a case where item 2 applies. | The net proceeds of the sale, together with—(a) any insurance money received in respect of the asset as a result of an event affecting the price obtainable on the sale, and(b) any other compensation of any description so received, so far as it consists of capital sums.
2. Sale of the asset where—(a) the sale is at less than market value,(b) there is no charge to tax under ITEPA 2003, and(c) the condition in subsection (3) is met by the buyer. | The market value of the asset at the time of the sale.
3. Demolition or destruction of the asset. | The net amount received for the remains of the asset, together with—(a) any insurance money received in respect of the demolition or destruction, and(b) any other compensation of any description so received, so far as it consists of capital sums.
4. Permanent loss of the asset otherwise than as a result of its demolition or destruction. | Any insurance money received in respect of the loss and, so far as it consists of capital sums, any other compensation of any description so received.
5. Permanent discontinuance of the trade followed by the occurrence of an event within any of items 1 to 4. | The disposal value for the item in question.
6. Any event not falling within any of items 1 to 5. | The market value of the asset at the time of the event.
2
The amounts referred to in column 2 of the Table are those received by the person required to bring the disposal value into account.
3
The condition referred to in item 2 of the Table is met by the buyer if—
a
the buyer’s expenditure on the acquisition of the asset cannot be qualifying expenditure under Part 2 or 6 (plant and machinery and research and development allowances), or
b
the buyer is a dual resident investing company which is connected with the seller.

Disposal value restricted in case of interest in land
424
1
If the asset in relation to which a disposal value is required to be brought into account under section 421 or 422 is an interest in land, the disposal value is restricted by excluding the undeveloped market value of the interest.
2
“The undeveloped market value of the interest” means the amount that, at the time of the disposal, 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 disposal—
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 disposal, 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.

Receipt of capital sum
425
1
This section applies if a person—
a
has incurred qualifying expenditure, and
b
receives a capital sum which, in whole or in part, it is reasonable to attribute to that expenditure.
2
The person is required to bring into account as a disposal value for the chargeable period in which the capital sum is received so much of the capital sum as is reasonably attributable to the qualifying expenditure.
3
This section does not apply if the capital sum falls to be brought into account under section 421 or 422.

Cases in which a person is entitled to a balancing allowance

Pre-trading expenditure
426
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
a
the expenditure is qualifying expenditure under—
i
section 401(4)
(pre-trading exploration expenditure where exploration etc. has ceased before first day of trading), or
ii
section 402 (pre-trading expenditure on plant or machinery), and
b
the first day of trading occurs in that chargeable period.

Giving up exploration, search or inquiry
427
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
a
the qualifying expenditure is expenditure on mineral exploration and access,
b
he gives up the exploration, search or inquiry to which the expenditure related in that chargeable period, and
c
he does not then or later carry on a mineral extraction trade which consists of or includes the working of mineral deposits to which the expenditure related.

Ceasing to work mineral deposits
428
1
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
a
in that chargeable period he permanently ceases to work particular mineral deposits, and
b
the qualifying expenditure is expenditure incurred—
i
on mineral exploration and access relating solely to those deposits, or
ii
on acquiring a mineral asset consisting of those deposits or part of them.
2
If the person carrying on the mineral extraction trade is entitled to two or more mineral assets which at any time were—
a
comprised in a single mineral asset, or
b
otherwise derived from a single mineral asset,
subsection (1) does not apply until such time as the person permanently ceases to work the deposits comprised in all the mineral assets concerned taken together.
3
For the purposes of subsection (2), if a mineral asset relates to, but does not actually consist of, mineral deposits, the deposits to which the asset relates are to be treated as comprised in the asset.

Buildings etc. for benefit of employees abroad ceasing to be used
429
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
a
the expenditure is qualifying expenditure under section 415 (contributions to buildings or works for benefit of employees abroad), and
b
in that chargeable period the buildings or works permanently cease to be used for the purposes of or in connection with the mineral extraction trade.

Disposal of asset, etc.
430
1
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if—
a
the qualifying expenditure was incurred on the provision of any assets, and
b
in that chargeable period any of those assets—
i
is disposed of, or
ii
otherwise permanently ceases to be used by him for the purposes of the mineral extraction trade.
2
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if any of the following events occurs in that chargeable period in relation to assets representing the qualifying expenditure—
a
the person loses possession of the assets in circumstances where it is reasonable to assume that the loss is permanent;
b
the assets cease to exist as such (as a result of destruction, dismantling or otherwise);
c
the assets begin to be used wholly or partly for purposes other than those of the mineral extraction trade carried on by the person.

Discontinuance of trade
431
A person’s entitlement to an allowance for a chargeable period is to a balancing allowance if in that chargeable period the mineral extraction trade is permanently discontinued.

Foreign permanent establishment exemption
431A
1
Subsection (2) applies if—
a
an election under section 18A of CTA 2009 has effect in relation to a company, and
b
the company carries on any trade which consists of, or includes, the working of a source of mineral deposits.
2
That trade so far as carried on through one or more permanent establishments outside the United Kingdom is treated for the purposes of this Part as a trade—
a
separate from any other trade of the company, and
b
all the profits and gains from which are not, or (if there were any) would not be, chargeable to tax.

Disposal value: no allowance/no charge cases
431B
1
If—
a
an election under section 18A of CTA 2009 has effect in relation to a company, and
b
the operation of sections 431A and 421(1)(b)(ii) and (2) requires the company to bring the disposal value of an asset into account,
the disposal value is such an amount as gives rise to neither a balancing allowance nor a balancing charge.
2
Subsection (1) does not apply if—
a
the company's qualifying expenditure in respect of the asset exceeds £5 million,
b
the company has claimed any capital allowance in respect of any of that expenditure, and
c
the company has, at any time in a relevant accounting period, used the asset otherwise than for the purposes of a permanent establishment outside the United Kingdom.
3
In subsection (2)(c) “
relevant accounting period
” means an accounting period ending before, but ending not more than 6 years before, “
the relevant day
” as defined by section 18F of CTA 2009.

Notional allowances
431C
1
Subsection (2) applies if—
a
an election under section 18A of CTA 2009 has effect in relation to a company, and
b
but for section 18A of CTA 2009 and section 431A(2)(b), an allowance under this Part (“the notional allowance”) could be claimed under section 3(1) in respect of assets provided for the purposes of a permanent establishment outside the United Kingdom through which business is or has been carried on by the company.
2
The notional allowance (and any charge in connection with it which would have arisen if the allowance had been claimed) is to be made automatically and reflected in any calculation, for any relevant accounting period of the company, of the profits or losses attributable to business carried on by the company through such a permanent establishment.
3
Subsection (4) applies if, at the time an election under section 18A of CTA 2009 takes effect in relation to a company, the company is, by reason of sections 431A and 421(1)(b)(ii) and (2), required to bring into account the disposal value of any asset provided for the purposes of a foreign permanent establishment through which business is or has been carried on by the company.
4
For the purposes of subsections (1) and (2), the company is treated as having incurred at that time, for the purposes of the trade mentioned in section 431A(2), qualifying expenditure of an amount equal to that disposal value.
5
In subsection (2) “
relevant accounting period
”, in relation to a company by which an election under section 18A of CTA 2009 is made, means an accounting period of the company to which the election applies (as to which see section 18F of that Act).

Persons leaving cash basis
431D
1
This section applies if—
a
a person carrying on a mineral extraction trade leaves the cash basis in a chargeable period,
b
the person has incurred expenditure at a time when
the cash basis applies
in relation to the trade,
c
some or all of the expenditure was brought into account in calculating the profits of the trade on the cash basis, and
d
the expenditure would have been qualifying expenditure if
the cash basis had not applied
at the time the expenditure was incurred.
2
In this section—
a
the “relieved portion” of the expenditure is the higher of the following—
i
the amount of that expenditure for which a deduction was allowed in calculating the profits of the trade, or
ii
the amount of that expenditure for which a deduction would have been so allowed if the expenditure had been incurred wholly and exclusively for the purposes of the trade;
b
the “unrelieved portion” of the expenditure is any remaining amount of the expenditure.
3
An amount of the expenditure equal to the amount (if any) by which the unrelieved portion of the expenditure exceeds the relieved portion of the expenditure is to be regarded as qualifying expenditure incurred by the person in the chargeable period.
4
For the purposes of this section a person carrying on a trade leaves the cash basis in a chargeable period if—
a
immediately before the beginning of the chargeable period
the cash basis applied
in relation to the trade, and
b
the cash basis does not apply
in relation to the trade for the chargeable period.
4A
Subsection (11)(za) of section 1A (capital allowances and charges: cash basis) applies for the purposes of this section as it applies for the purposes of that section.
Chapter 7

Supplementary provisions

Giving effect to allowances and charges
432
1
An allowance or charge to which a person is entitled or liable under this Part is to be given effect in calculating the profits of that person’s mineral extraction trade, by treating—
a
the allowance as an expense of the trade, and
b
the charge as a receipt of the trade.
2
This section is subject to section 6E (giving effect to allowances and charges:
NI
rate activity cases).

Treatment of demolition costs
433
1
The net cost to a person of demolishing an asset which represents qualifying expenditure is added to that qualifying expenditure in determining the amount of any balancing allowance or balancing charge for the chargeable period in which the demolition occurs.
2
“The net cost of the demolition” means the amount, if any, by which the cost of the demolition exceeds any money received for the remains of the asset.
3
If this section applies, the net cost of the demolition is not treated as expenditure incurred on any other asset which replaces the demolished asset.

Time when expenditure incurred
434
1
For the purposes of this Part, expenditure incurred for the purposes of a mineral extraction trade by a person about to carry it on is treated as incurred by that person on the first day on which that person does carry it on.
2
Subsection (1) does not apply to pre-trading expenditure on mineral exploration and access (for which specific provision is made by section 400(4)).

Shares in assets
435
1
This Part applies in relation to a share in an asset as it applies (under section 571) in relation to a part of an asset.
2
For the purposes of those provisions, a share in an asset is treated as used for the purposes of a trade so long as, and only so long as, the asset is used for the purposes of the trade.

Meaning of “development” etc.
436
1
In this Part—
- “development”
- “development order”,
- “general development order”, and
- “planning permission”,
have the meaning given by the relevant planning enactment.
2
“The relevant planning enactment” means—
a
in relation to land in England or Wales, section 336(1) of the Town and Country Planning Act 1990 (c. 8);
b
in relation to land in Scotland, section 277(1) of the Town and Country Planning (Scotland) Act 1997 (c. 8);
c
in relation to land in Northern Ireland, section 250(1) of the Planning Act (Northern Ireland) 2011.
S. 416E inserted (with effect as mentioned in s. 63(3) of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 11
Words in s. 418(4) inserted (with effect as mentioned in s. 63(3) of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 12
Words in s. 419(1) substituted (with effect as mentioned in s. 63 of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 13(2)
S. 419(3)-(6) inserted (with effect as mentioned in s. 63 of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 13(3)
S. 416D and preceding crossheading inserted (with effect as mentioned in s. 63(3) of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 10
Pt. 5 Ch. 5A inserted (with effect as mentioned in s. 63 of the amending Act) by Finance Act 2002 (c. 23), s. 63, Sch. 21 para. 9
Words in s. 423(1) substituted (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1) , s. 723 , Sch. 6 para. 254 (with Sch. 7 )
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 )
S. 423 excluded (E.W.S.) (8.6.2005) by Railways Act 2005 (c. 14), s. 60(2), Sch. 10 para. 14(2)(a); S.I. 2005/1444, art. 2(1), Sch. 1
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)
Words in s. 416B(5) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 355 (with Sch. 2)
Words in s. 420(b) inserted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 356 (with Sch. 2)
Words in s. 420(b) substituted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 235 (with Sch. 9 paras. 1-9, 22)
Word in s. 395(1)(d) omitted (with effect in accordance with s. 92(10) of the amending Act) by virtue of Finance Act 2013 (c. 29), s. 92(2)
Words in s. 395(3) substituted (with effect in accordance with Sch. 32 para. 11 of the amending Act) by Finance Act 2013 (c. 29), Sch. 32 para. 10
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)
S. 416 heading substituted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(4)(d)
Word in s. 416(1)(a) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(4)(a)
Words in s. 416(5) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(4)(b)
Word in s. 416(6)(a) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(4)(a)
S. 416(7A) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(4)(c)
Words in s. 416B(2) inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(6)
Ss. 416ZA, 416ZB inserted (with effect in accordance with s. 92(10) of the amending Act) by Finance Act 2013 (c. 29), s. 92(5)
Ss. 416ZC-416ZE inserted (with effect in accordance with Sch. 32 para. 11 of the amending Act) by Finance Act 2013 (c. 29), Sch. 32 para. 9
Ss. 431A-431C inserted (with effect in accordance with s. 67(9) of the amending Act) by Finance Act 2014 (c. 26), s. 67(7)
Words in s. 394(2) inserted (with effect in accordance with s. 67(8) of the amending Act) by Finance Act 2014 (c. 26), s. 67(2)
Words in s. 396(2) substituted (with effect in accordance with s. 68(4) of the amending Act) by Finance Act 2014 (c. 26), s. 68(2)
Words in s. 398 inserted (with effect in accordance with s. 68(4) of the amending Act) by Finance Act 2014 (c. 26), s. 68(3)
S. 399(1A)(1B) inserted (with effect in accordance with s. 67(8) of the amending Act) by Finance Act 2014 (c. 26), s. 67(3)
S. 432(2) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 13(3)
S. 432 renumbered as s. 432(1) (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 13(2)
S. 394(2A) inserted (with effect in accordance with s. 5 of the amending Act) by Corporation Tax (Northern Ireland) Act 2015 (c. 21), Sch. 1 para. 12
Words in s. 436(2)(c) substituted (N.I.) (13.2.2015 for specified purposes, 1.4.2015 in so far as not already in force) by Planning Act (Northern Ireland) 2011 (c. 25), s. 254(1)(2), Sch. 6 para. 93 (with s. 211); S.R. 2015/49, art. 2
S. 419A inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 54
S. 431D inserted (with effect in accordance with Sch. 2 para. 64 of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 2 para. 55
Words in s. 419A(1) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2022 (c. 3), Sch. 1 paras. 35, 61(1)
S. 431D(4A) inserted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 42(4), 47 (with Sch. 10 paras. 48-50)
Words in s. 431D(1)(d) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 42(2)(b), 47 (with Sch. 10 paras. 48-50)
Words in s. 431D(4)(a) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 42(3)(a), 47 (with Sch. 10 paras. 48-50)
Words in s. 431D(4)(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 42(3)(b), 47 (with Sch. 10 paras. 48-50)
Words in s. 431D(1)(b) substituted (for the tax year 2024-25 and subsequent tax years) by Finance Act 2024 (c. 3), Sch. 10 paras. 42(2)(a), 47 (with Sch. 10 paras. 48-50)