Capital Allowances Act 2001 section 161

Pre-trading expenditure on mineral exploration and access

Section 161 deals with how capital expenditure on plant or machinery for mineral exploration and access, incurred before a mineral extraction trade begins, is brought into the capital allowances system when the trade commences.

• Pre-trading capital expenditure on plant or machinery for mineral exploration and access can be brought into the capital allowances pool at cost when the mineral extraction trade starts, rather than at the lower of cost or market value
• The person must still own the plant or machinery on the first day of trading; they are then treated as if they acquired it on that day for an amount equal to the original pre-trading expenditure (or, if the asset was sold and reacquired before trading began, the most recent acquisition cost)
• If the plant or machinery is sold, demolished, destroyed or abandoned before the first day of trading, this treatment does not apply — although mineral extraction allowances under section 402 may be available instead
• Research and development allowances under Part 6 may also be available for some types of pre-trading mineral exploration expenditure, since oil and gas exploration and appraisal is treated as research and development