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HMRC internal manual

Business Income Manual

Measuring the profits (particular trades): Mineral extraction: Bonner v Basset Mines Ltd [1912] 6TC146

The issue was whether the cost of deepening a mine shaft was a capital or revenue expenditure for tax purposes (see BIM62010).

The company operated a tin mine, the ore in one part of which was exhausted. The company therefore deepened one of the main shafts, not for the purpose of winning ore from a vertical lode, but for the purpose of exploring for pockets of ore and obtaining access for men and materials to lower levels.

Held, that the expenditure was capital and not an allowable deduction.

Horridge J noted, at page 151, that:

‘I think the above description of the shaft shows quite clearly that the money expended on the extension of the shaft for a distance of 50 fathoms was in no sense a working expenditure … and there is no statement in connection with the description which could in any way be said to be evidence of its being such working expenditure… they seem to me to point in exactly the opposite direction and not to be capable on any construction of them as affording such evidence.’