Capital Allowances Act 2001 section 406

Reduction where premium relief previously allowed

Section 406 reduces the qualifying expenditure on a mineral asset where the buyer has already received tax relief through deductions for lease premiums on the same interest in land, thereby preventing double relief for the same expenditure.

• Applies where the mineral asset is or includes an interest in land and the buyer has previously claimed deductions for taxable lease premiums in earlier chargeable periods
• Qualifying expenditure on the mineral asset is reduced by a formula: D × (E ÷ T)
• The formula uses three components: D (total premium deductions already claimed), E (the capital expenditure that would have qualified for mineral extraction allowances in those earlier periods), and T (the total capital expenditure on acquiring the interest in land)
• The purpose is to prevent a buyer from obtaining both lease premium relief and mineral extraction allowances on the same underlying expenditure