OT26211 - Capital Allowances: Mineral Extraction Allowance

Balancing Allowances and Charges

The occasions where balancing allowances are substituted for writing down allowances include:

Permanent discontinuance of trade (CAA2001/s431)

1. Permanent cessation of the working of particular mineral deposits (CAA2001/s428)
2. Assets disposed of or otherwise permanently ceasing to be used for the trade (CAA2001/s430). This would cover a company ceasing to be resident in the UK.
3. Certain pre-trading expenditure on machinery or plant (CAA2001/s426). Certain pre- trading exploration and access expenditure where the source on which the expenditure has been incurred has ceased before commencement of trade.
4. A person who has incurred qualifying expenditure on exploration and access (including pre-trading expenditure) gives up the search without then or later carrying on a trade which includes these deposits (CAA2001/s427). OTO accepts that the search is given up when an unsuccessful exploration programme is concluded on the particular structure. Whether an exploration program is unsuccessful and has been concluded on a particular structure is a question of fact to be decided by reference to the detailed surrounding circumstances.
5. Trader loses possession of assets and it is reasonable to assume the loss is permanent, e.g. surrender of licence (CAA2001/s430).
6. Assets cease to exist, through destruction, dismantlement, demolition or otherwise (CAA2001/s433).
7. Assets begin to be used (wholly or in part) for other than trade purposes (CAA2001/s421(1)(b)(ii)).
8. A mineral asset begins to be used for development in certain circumstances (CAA2001/s422).
9. Restoration following cessation of trade. Relief is restricted to the net cost of certain works incurred in the three years immediately following cessation which would have been allowed as MEA or as a profits deduction if incurred during the trade (CAA2001/s416).