Capital Allowances Act 2001 section 431B

Disposal value: no allowance/no charge cases

Section 431B sets out how the disposal value of a mineral extraction asset is determined when a company has elected for the foreign permanent establishment exemption, ensuring that in most cases no balancing allowance or balancing charge arises.

• Where a company has elected for the foreign permanent establishment exemption and is required to bring a disposal value into account under the mineral extraction allowance rules, the disposal value is set at a neutral amount — one that produces neither a balancing allowance nor a balancing charge.
• This neutral treatment does not apply if the company's qualifying expenditure on the asset exceeds £5 million, the company has claimed capital allowances on any of that expenditure, and the asset has been used for purposes other than those of an overseas permanent establishment at any time in a relevant accounting period.
• A relevant accounting period is one that ends before the "relevant day" (as defined in the Corporation Tax Act 2009) but no more than six years before that day.
• The effect of the exception is that where a high-value asset has benefited from UK capital allowances and has been used for UK (non-overseas) purposes within the six-year window, the normal balancing allowance or charge rules apply instead of the neutral treatment.

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