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HMRC internal manual

Oil Taxation Manual

Corporation tax ring fence: first-year allowances for a ring fence trade: mineral extraction allowances - disposals of qualifying assets


Amendments have been made to the disposal rules in the MEA code to accommodate the introduction of first-year allowances.

Where there is a disposal event in the year in which the expenditure is incurred, the first-year allowance given is taken into account in calculating the balancing charge. This provision is similar to that in the plant and machinery code (CAA2001\S418(4)).

A person cannot claim both first-year allowances and writing down allowances in respect of the same expenditure. The definition in CAA2001\S419(1) of unrelieved expenditure has been amended to ensure any first-year allowances are taken into account.

The rules are modified for the purpose of computing a balancing allowance or charge when there is a disposal in the chargeable period in which the expenditure is incurred. This modification is necessary to take into account the possibility that the first-year allowance claim may not be for the whole of the first-year qualifying expenditure. In such circumstances, the balance of the first-year qualifying expenditure after deducting the first-year allowance is to be treated as unrelieved qualifying expenditure in that period. The effect is that the first-year allowance claimed less any balancing charge or plus any balancing allowance equals the difference between the expenditure incurred and total disposal receipts.