A balancing allowance may arise when a mine etc ceases to be
worked or a foreign concession ends. There is legislation which
lets a person whose trade consists of or includes the working of a
source of mineral deposits carry back the part of a balancing
allowance which exceeds the profits of the last year in which the
trade is carried on.
All of the following conditions must be satisfied before a
balancing allowance can be carried back:
When the conditions are met the balancing allowance that exceeds
the profits of the last chargeable period may be carried back
against the profits of earlier chargeable periods. It is set first
against the profits of the preceding chargeable period, and then
against the one before that etc. There is an overall time limit of
five years.
Where a company carries back a balancing allowance it cannot
use that allowance to create or augment a loss.
A company may claim both loss relief under ICTA88/S393A (1)
and to carry back a balancing allowance. In that case the balancing
allowance is ignored for the purposes of quantifying the amount of
the loss relief due under the claim.
A claim for loss relief under ICTA88/S393A (1) takes priority
over a claim to carry back a balancing allowance. The loss claim is
dealt with first; any remaining profits can then be relieved by the
balancing allowance.
