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HMRC internal manual

Capital Allowances Manual

MEA: Qualifying expenditure: Pre-trading expenditure: on plant and machinery

Certain pre-trading expenditure by a person on mineral exploration and access before he commences a trade of mineral extraction is relieved by CAA01/S400 and CAA01/S401.

CAA01/S402 provides relief for the cost of plant and machinery where the expenditure is on mineral exploration and access and the machinery or plant is sold, destroyed or abandoned before the trade commences. The qualifying expenditure is treated as being incurred on the first day on which the trade of mineral extraction is carried on. The amount of qualifying expenditure is limited to the net amount after taking into account any sale, insurance, salvage or compensation monies received.

CAA01/S426 provides that expenditure qualifying under Section 402 is relieved in full on commencement of the trade - as a balancing allowance rather than being subject to writing-down allowances.

If the mineral exploration and access activity, for which the plant and machinery was used, has ceased before the first day of trading then any expenditure incurred more than six years before the date of commencement is left out of account.