Finance Act 2014

67 Mineral extraction allowances: activities not within charge to tax U.K.

(1) CAA 2001 is amended as follows.

(2) In section 394(2) (meaning of mineral extraction trade), after “deposits” insert “ but to the extent only that the profits or gains from that trade are, or (if there were any) would be, chargeable to tax ”.

(3) In section 399 (expenditure excluded from being qualifying expenditure), after subsection (1) insert—

“(1A) Expenditure incurred by a person for the purposes of a mineral extraction trade is not qualifying expenditure if—

(a) when the expenditure is incurred, the person is carrying on the trade but the trade is not at that time a mineral extraction trade, or

(b) the person has not begun to carry on the trade when the expenditure is incurred and, when the person begins to carry on the trade, the trade is not a mineral extraction trade.

(1B) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (1A).”

(4) In section 160 (expenditure treated as incurred for purposes of mineral extraction trade)—

(a) the existing text becomes subsection (1), and

(b) after that subsection insert—

“(2) Subsection (1) does not apply to expenditure if—

(a) when it is incurred, the person is carrying on the trade but the trade is not at that time a mineral extraction trade, or

(b) when it is incurred, the person has not begun to carry on the trade and, when the person begins to carry on the trade, the trade is not a mineral extraction trade.

(3) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (2).”

(5) For section 161(4)(a) (pre-trading expenditure on plant or machinery for mineral exploration and access), substitute—

“(a) pre-trading expenditure” means capital expenditure incurred before the day on which a person begins to carry on a trade that is a mineral extraction trade, but only if there is no prior time when the person carried on that trade and the trade was not a mineral extraction trade,”.

(6) After section 161(4) insert—

“(4A) Section 577(2) (references to commencement etc of a trade) does not apply to subsection (4)(a).”

(7) After section 431 (discontinuance of trade) insert—

“431A Foreign permanent establishment exemption

(1) Subsection (2) applies if—

(a) an election under section 18A of CTA 2009 has effect in relation to a company, and

(b) the company carries on any trade which consists of, or includes, the working of a source of mineral deposits.

(2) That trade so far as carried on through one or more permanent establishments outside the United Kingdom is treated for the purposes of this Part as a trade—

(a) separate from any other trade of the company, and

(b) all the profits and gains from which are not, or (if there were any) would not be, chargeable to tax.

431B Disposal value: no allowance/no charge cases

(1) If—

(a) an election under section 18A of CTA 2009 has effect in relation to a company, and

(b) the operation of sections 431A and 421(1)(b)(ii) and (2) requires the company to bring the disposal value of an asset into account,

the disposal value is such an amount as gives rise to neither a balancing allowance nor a balancing charge.

(2) Subsection (1) does not apply if—

(a) the company's qualifying expenditure in respect of the asset exceeds £5 million,

(b) the company has claimed any capital allowance in respect of any of that expenditure, and

(c) the company has, at any time in a relevant accounting period, used the asset otherwise than for the purposes of a permanent establishment outside the United Kingdom.

(3) In subsection (2)(c) “relevant accounting period” means an accounting period ending before, but ending not more than 6 years before, “the relevant day” as defined by section 18F of CTA 2009.

431C Notional allowances

(1) Subsection (2) applies if—

(a) an election under section 18A of CTA 2009 has effect in relation to a company, and

(b) but for section 18A of CTA 2009 and section 431A(2)(b), an allowance under this Part (“the notional allowance”) could be claimed under section 3(1) in respect of assets provided for the purposes of a permanent establishment outside the United Kingdom through which business is or has been carried on by the company.

(2) The notional allowance (and any charge in connection with it which would have arisen if the allowance had been claimed) is to be made automatically and reflected in any calculation, for any relevant accounting period of the company, of the profits or losses attributable to business carried on by the company through such a permanent establishment.

(3) Subsection (4) applies if, at the time an election under section 18A of CTA 2009 takes effect in relation to a company, the company is, by reason of sections 431A and 421(1)(b)(ii) and (2), required to bring into account the disposal value of any asset provided for the purposes of a foreign permanent establishment through which business is or has been carried on by the company.

(4) For the purposes of subsections (1) and (2), the company is treated as having incurred at that time, for the purposes of the trade mentioned in section 431A(2), qualifying expenditure of an amount equal to that disposal value.

(5) In subsection (2) “relevant accounting period”, in relation to a company by which an election under section 18A of CTA 2009 is made, means an accounting period of the company to which the election applies (as to which see section 18F of that Act).”

(8) The amendments made by subsections (1) to (6) of this section have effect—

(a) for the purposes of corporation tax, in relation to claims made on or after 1 April 2014, and

(b) for the purposes of income tax, in relation to claims made on or after 6 April 2014,

and in relation to those claims the amendments are treated as always having had effect.

(9) The amendment made by subsection (7) has effect in relation to elections under section 18A of CTA 2009 which start to have effect on or after 1 April 2014.