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HMRC internal manual

International Manual

Foreign Permanent Establishments of UK Companies: capital allowances: plant & machinery: mineral extraction allowances and other allowances

Other allowances

As with Plant and Machinery Capital Allowances, no claim is necessary (CTA09/S18C(5)); it is assumed a claim has been made, and the relevant expenditure reduces automatically so that if, for example, the anti-diversion rule applies (INTM286000 onwards), the Lower Level of Tax test would proceed on the basis of profits after a claim to capital allowances.

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Mineral extraction allowances

FA14 introduced legislation relating to the treatment of Mineral Extraction Allowances (MEAs) where the mineral extraction activity enters or ceases to be within the charge to UK tax. It ensures that the treatment of MEAs is certain and consistent between businesses and aligns with the existing principles for plant and machinery allowances. It also confirms that for the purposes of MEAs a mineral extraction trade consists of activity within the charge to UK tax

From 1 /6 April 2014

The activity of an exempt foreign permanent establishment (FPE) to be treated as a separate mineral extraction trade for the purposes of MEAs. (CAA 2001/ S 431A)

There are transitional rules for MEAs similar to those for plant and machinery allowances. These rules provide that where a disposal value is required to be brought into account this will not, in most cases, give rise to a balancing allowance or a balancing charge when a company elects into FPE exemption. However, for some assets, where the company’s qualifying expenditure exceeds £5 million, the normal disposal value will be brought into account for capital allowance purposes. (CAA2001/S431B)

Notional capital allowances will be given automatically in calculating the profits or losses of the exempt FPE, as if the exempt FPE were within the charge to UK tax. (CAA 2001/ S 431C)