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HMRC internal manual

Oil Taxation Manual

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HM Revenue & Customs
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Capital allowances: mineral extraction allowance - limitations on qualifying expenditure on second hand assets

There are limits placed on qualifying expenditure on second hand assets under CAA2001\S407-409 (see OT26320, OT26325 & OT26330).

CAA2001\S410 UK oil licences, the limit is the original licence payment (see OT26360)

CAA2001\S411 Assets generally, the limit is the residue of the previous trader’s qualifying expenditure.

CAA2001\S412 Transfer of assets within a group, the limit is the initial group expenditure. A group is defined at CAA2001\S413.

There is also a restriction on qualifying expenditure to exclude any expenditure on which a deduction has been given to a previous trader for intangible drilling costs (CAA2001\S407(4)). This covers cases where the previous trader received Case 1 relief under the old New Brunswick treatment.