|
Capital Allowances |
49 |
24A.5.1 Qualifying Expenditure |
| ‘Qualifying expenditure’ is defined both by inclusion461 and exclusion.462 Thus, the expense incurred in an abortive application for planning permission is allowed,463 but expense incurred on the acquisition of a site on which further expense will be incurred which will qualify for relief, is not.464 Expenditure on Plant and Machinery is usually left to the Plant and Machinery system of allowances, but this will not apply where the expense is a pre-trading expense and the asset is disposed of before the trade begins; such expense may, therefore be qualifying expenditure.465 A similar rule applies to pre-trading exploration expenditure.466 Also included are certain payments by mining concerns for site comfort and development outside the UK.467 Expenditure on restoring a site at the end of the operation also qualifies.468 |
| When qualifying expenditure is incurred for the purposes of mineral extraction, a writing down allowance is given by reference to the amount by which the qualifying expenditure exceeds any disposal proceeds received during the period. The scheme is a simple reducing balance, so that previous allowances reduce the qualifying expenditure. For pretrading expenditure on Plant and Machinery disposed of before the trade begins, and pretrading exploration expenditure, the figure is 10%; for other qualifying expenditure, the figure is 25%. 469 The allowance is given in taxing the mineral extraction trade.470 The cost of the land is not qualifying expenditure; a valuation is carried out by assuming that there is no source of mineral deposits, and that only existing or authorised use is allowed.471 |
| Further rules apply to qualifying expenditure on second hand assets.472 |
| CAA section 570A, the anti-avoidance rule explained at §24A.3.6, applies here also. |
| FA 2002 imposes a surcharge certain on ring fence trades. As if in compensation it adds a first year allowance to the mineral extraction allowance.473 The allowance is 100% of the expenditure and there is an express provision to deal with artificially inflated claims for first year allowances. |
24A.6 Research and Development Allowances |
| FA 2000 made two important changes in this area. First, it provided some new definitions. |