Capital Allowances Act 2001 section 412

Transfers of mineral assets within group: limit is initial group expenditure

Section 412 prevents a group of companies from inflating the qualifying expenditure on a mineral asset by transferring it between group companies at increasing values.

• When a mineral asset is transferred between companies in the same group, the buyer's qualifying capital expenditure is capped at the amount the seller originally paid for the asset — not the potentially higher intra-group transfer price.
• Where the asset is an interest or right carved out of a larger mineral asset held by the seller, the cap is limited to a just and reasonable proportion of the seller's expenditure on that larger asset.
• If the asset passes through a chain of group companies, the cap is applied sequentially starting from the first transfer, effectively limiting expenditure to what the group originally paid when it first acquired the asset from outside the group.
• Where the buyer carries on a mineral extraction trade and the asset is an interest in land, the rules for excluding undeveloped market value (section 404) and for buildings or structures ceasing to be used (section 405) are applied as though the buyer had acquired the land at the time the first group company purchased it, with all allowances and balancing charges from intermediate group sellers taken into account.