Capital Allowances Act 2001 section 401

Pre-trading exploration expenditure

Section 401 deals with how expenditure on mineral exploration and access incurred before a person starts trading qualifies for capital allowances, depending on whether exploration is still ongoing when the trade begins.

• Pre-trading expenditure on mineral exploration and access (excluding plant or machinery) may qualify for capital allowances, but the amount depends on whether exploration is still continuing at the source on the first day of trading.
• If exploration is still continuing when trading begins, all pre-trading exploration expenditure qualifies, reduced by any relevant capital receipts received before the trade started.
• If exploration has ceased before the trade begins, only expenditure incurred within the six years ending on the first day of trading qualifies, again reduced by any relevant capital receipts.
• Relevant receipts are capital sums received before the first day of trading that are reasonably attributable to the pre-trading exploration expenditure.