OT21248 - Corporation Tax Ring Fence and Supplementary Charge

First-year Allowances for a Ring Fence Trade: Mineral Extraction Allowance: Further Rules

CAA01/s416C, s416D and s416E contain further rules relating to the timing and amount of first- year allowances, and rules to deal with artificially inflated claims to first-year allowances.

CAA01/s416C prevents any pre-17 April 2002 expenditure from qualifying for first-year allowances by disapplying, for this purpose, the provisions that deem pre-commencement expenditure to have been incurred on the first day of trading, even though it was actually incurred at some earlier time.

CAA01/s416D provides that the new first-year allowances are to be given for the chargeable period in which the qualifying expenditure is incurred and that the rate is to be 100%.

As with other first-year allowances, a claim need not be for the whole amount of any qualifying expenditure.

CAA01/s416E counters attempts to produce artificially inflated claims for MEA first-year allowances. It is aimed at transactions where the main object or one of the main objects is to obtain a first-year allowance which would not otherwise be due, or a first-year allowance of inflated amount. Any case where it is considered this provision is applicable should be referred to an Assistant Director.