Capital Allowances Act 2001 section 431D

Persons leaving cash basis

Section 431D determines how qualifying expenditure is calculated when a person carrying on a mineral extraction trade switches from the cash basis to the accruals basis of accounting.

• When a mineral extraction trader leaves the cash basis, any expenditure previously deducted under cash basis rules is reviewed to determine whether it can qualify for capital allowances going forward
• The expenditure is split into a "relieved portion" (the amount already deducted, or that could have been deducted, in calculating trade profits) and an "unrelieved portion" (any remaining balance)
• If the unrelieved portion exceeds the relieved portion, the excess is treated as qualifying expenditure incurred in the chargeable period when the trader leaves the cash basis
• A trader is treated as leaving the cash basis when the cash basis applied immediately before the start of a chargeable period but does not apply for that period