What does section 160 of the Capital Allowances Act 2001 do?

Section 160 treats expenditure on plant or machinery for mineral exploration and access, where connected with a mineral extraction trade, as incurred for the purposes of that trade. This relaxes the normal rule requiring expenditure to be directly for the purposes of the qualifying activity, enabling the person to claim mineral extraction allowances under Part 5 of the Act.

When does section 160 not apply to mineral exploration expenditure?

Section 160 does not apply in two situations: first, if the person is already carrying on a trade that is not a mineral extraction trade when the expenditure is incurred; second, if the person has not yet begun trading and the trade, when it commences, turns out not to be a mineral extraction trade.

How are trade commencement rules affected by section 160?

Section 160 specifically disapplies the general interpretive rule in section 577(2) of the Capital Allowances Act 2001 when determining whether a person has begun to carry on a trade and whether that trade is a mineral extraction trade. The question is therefore determined on the ordinary facts rather than by reference to statutory commencement rules.

Can a non-mineral extraction business claim allowances under section 160?

No. If a business operates a trade that is not a mineral extraction trade at the time the expenditure is incurred, section 160 does not apply. For example, a general construction company spending on drilling equipment for possible future mineral extraction cannot use section 160 to treat that expenditure as incurred for a mineral extraction trade.

Capital Allowances Act 2001 section 160

Expenditure treated as incurred for purposes of mineral extraction trade

Section 160 ensures that spending on plant or machinery for mineral exploration and access, where connected with a mineral extraction trade, is treated as incurred for the purposes of that trade.

Expenditure on plant or machinery for mineral exploration and access, connected with a mineral extraction trade, is treated as incurred for the purposes of that trade
This relaxes the normal rule that expenditure must be directly for the purposes of the qualifying activity
The treatment does not apply if the trade being carried on is not a mineral extraction trade at the time the expenditure is incurred, or if the trade is not a mineral extraction trade when it subsequently begins
The usual rules about when a trade is treated as commencing do not apply when determining whether these exceptions are met

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