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HMRC internal manual

Capital Allowances Manual

MEA: Qualifying expenditure: Acquisition of mineral deposits and rights

The term ‘mineral asset’ is defined in CAA01/S397 as ‘any mineral deposits or land comprising mineral deposits or any interests in or rights over such deposits or land’.

The cost of obtaining an option over mineral deposits constitutes qualifying expenditure within CAA01/S395 (1)(b) and CAA01/S398.

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 bought at a premium over its existing use value.

The costs of production licences represent expenditure on mineral assets rather than exploration and access.

The terms of the planning permission or licence to exploit a mineral deposit will normally require the mine operator to undertake a range of work to make the land fit for future use once the mining operations have ceased. This ‘restoration expenditure’ is part of the costs of acquiring the rights to the mineral deposits and is qualifying expenditure within CAA01/S395 (1)(b) - see CA50280.

Expenditure incurred in acquiring mineral deposits (or land comprising them) may fall within both CAA01/S.396 - mineral exploration and access - and CAA01/S397 - acquisition of a mineral asset. Where this happens CAA01/S398 states that the expenditure is treated as being on the acquisition of a mineral asset. The practical effect of this is that allowances are only available at 10%.