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HMRC internal manual

Capital Allowances Manual

MEA: Qualifying expenditure: Restoration costs

The cost of restoring a site, or part of a site, once mineral extraction has ceased is capital expenditure. The licence or planning permission under which an operator is allowed to extract minerals will contain obligations to restore the site after extraction has ceased. The costs relate to expenditure on the acquisition of a mineral asset within CAA01/S395 (1)(b). For further help, including guidance on when a mineral deposit ceases to be worked, and details of what sort of expenditure may be restoration expenditure, see BIM62031.

Restoration costs in a continuing trade

A balancing allowance will normally fall due when an operator permanently ceases to work a mineral deposit, without ceasing to trade (CA50460). The balancing allowance is based on the unrelieved qualifying expenditure on the mineral asset and mineral exploration and access relating to the deposit.

Capital restoration costs incurred after the permanent cessation of working of the mineral deposit to which they relate will normally qualify for writing down allowances at 10% under CAA01/S418 (1)(a). A further balancing allowance will normally fall due in respect of any unrelieved qualifying expenditure once the restoration of the site is complete. At this point the mineral asset will normally permanently cease to be used for the purposes of a mineral extraction trade - CAA01/S430 (1)(b)(ii).

Restoration expenditure after the trade has ceased

Under CAA01/S416 where a trade of mineral extraction has completely ceased and restoration expenditure is incurred then the expenditure is treated as qualifying expenditure under the MEA code provided that:

  • the expenditure is incurred within the three years following the last day the trade was carried on,


  • the expenditure has not been relieved somewhere else,


  • if the expenditure had been incurred while the trade was still being carried on the expenditure would have been qualifying expenditure under the MEA code or would have been deductible in computing the profits or gains of the trade.


Qualifying expenditure is treated as incurred on the last day of trading, and is thus relieved in full as a balancing allowance.

Relief is restricted to the net costs of restoration. Any receipts attributable to the restoration and received within three years of cessation of trading are to be set against the expenditure that would otherwise be qualifying expenditure.