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HMRC internal manual

Capital Allowances Manual

Dredging: Qualifying expenditure


Qualifying expenditure is the expenditure on dredging on which allowances are given.

Capital expenditure on dredging incurred for the purposes of a qualifying trade by the person carrying on that qualifying trade is qualifying expenditure where one of the conditions below is satisfied.

  • The qualifying trade consists of the maintenance or improvement of the navigation of a harbour, estuary or waterway.
  • The dredging is for the benefit of vessels coming to, leaving or using a dock or other premises occupied by that person for the purposes of the qualifying trade.


Example Pratt manufactures furniture and sells it wholesale. Manufacturing furniture is a qualifying trade for IBA and so Pratt has a qualifying trade for dredging. He occupies a dock that he uses for importing the materials he uses and sending out the furniture he produces. If he incurs capital expenditure on deepening the dock he can claim dredging allowances.

If capital expenditure is incurred partly for the purposes of a qualifying trade and partly for other purposes apportion the expenditure on a just and reasonable basis and give dredging allowances on the part of the expenditure apportioned to the qualifying trade.

Example Brown owns and operates ships. He uses some of them to transport goods, which is a qualifying trade for IBA, and others to run pleasure cruises, which is not. He occupies a dock that he uses for his trade of operating ships. If he incurs capital expenditure on dredging the dock the expenditure is apportioned between the part of his trade that consists of transporting goods and is a qualifying trade and the part, which consists of running pleasure, cruises and is not. Dredging allowances are given on the part that is allocated to the part trade of transporting goods.