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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Measuring the profits (particular trades): Mineral extraction: sinking mine shafts

Part 5 Capital Allowances Act 2001

Expenditure on sinking a mine shaft (see Coltness Iron Company v Black [1881] 1TC287 and BIM62045), or deepening such a shaft (see Bonner v Basset Mines Ltd [1912] 6TC146 and BIM62050), is capital expenditure of a mineral extraction trade and therefore not an allowable deduction in computing the taxable profits of that trade.

However, if the source is worked, mineral extraction allowances may be claimed for such expenditure (see CA50100 onwards).

Where the minerals lie in pockets or seams, exploration work to locate further minerals may be allowed as a deduction against profits, whether successful or not. The mine, however, must continue to be worked by means of the original shaft. Expenditure on trial borings from the surface or by drifts from the workings can be included in this category of deductions.

On the other hand, where such borings or drifts result in the sinking of a further shaft, the exploration expenditure, as well as the expense of sinking the shaft, is not allowable (see BIM62005).

The expense of work undertaken to recover a lost seam, in the case of a mine worked in faulty ground, is allowable as long as the mine continues to be worked by means of the original shaft.