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HMRC internal manual

Capital Allowances Manual

MEA: Second-hand assets: basis of apportionment

In view of the restriction in CAA01/S407 and CAA01/S411 whereby expenditure attracting allowances at the 25% rate is restricted by reference to a predecessor’s costs, it is unlikely that claims for relief at the higher 25% rate in excess of a predecessor’s costs will be met.

In deciding how much expenditure is attributable to the predecessor’s expenditure on mineral exploration and access, apportionment problems can arise if there are a series of disposals. Challenges to a taxpayer’s apportionment should only be made in significant cases where distortion appears to have taken place.

An example of this might be where it is claimed that the portion eligible for 25% relief has increased in value more quickly than the portion eligible for 10% relief.

If agreement cannot be reached the case should be referred to Energy Group (Oil Taxation Office) before any appeals are listed for the Commissioners.