OT26231 - Capital Allowances: Mineral Extraction Allowance

Non-qualifying Expenditure

Certain items are specifically stated not to be qualifying expenditure and these include:

1. Any expenditure on the acquisition of an interest in land (CAA2001/s404). This includes the cost of the land on which works are situated. In general, no relief is given for the cost of land, although given on the value of mineral assets. Relief is computed by excluding the "undeveloped market value" of the interest acquired in the land. There are also adjustments for buildings and premia. The Capital Allowances instructions should be followed.

Expenditure on non-mineral bearing land acquired to give access to adjacent mineral deposits is not qualifying expenditure, even though the access land may have been acquired at a premium over its existing value.

Where land or mineral deposits on land are not acquired, but only an option over them, the cost of the option constitutes expenditure under CAA2001/s395(1)(b). The purchaser becomes eligible for relief (subject to all conditions being satisfied) when the obligation to pay for the option becomes unconditional. This is likely to be, at the latest, when the option is granted but this will depend on its terms. The character of the expenditure does not alter if the option is not exercised but is subsequently abandoned. The Capital Allowances instructions should be followed.

2. Expenditure on the provision of plant or machinery unless within CAA2001/s399(1).
3. Any expenditure on a building where the whole of the building was constructed for use as an office - where only part of a building was constructed for use as an office, expenditure on that part is not ‘qualifying expenditure’ unless it was not more than 10% of the total expenditure, in which case it is ignored - or where the expenditure was on buildings or structures for occupation by or for the welfare of workers (CAA2001/s399(3)-(6)).
4. Any expenditure on which a deduction has been given to a previous trader for intangible drilling costs.