Corporation Tax Act 2009 section 137

Mineral exploration and access

Section 137 restricts the deductibility of intangible drilling costs incurred on mineral exploration and access in areas where the presence of mineral deposits in commercial quantities has already been established.

• Applies where a company incurs expenditure on mineral exploration and access in an area where commercial mineral deposits have already been found
• A deduction is only allowed if the expenditure would have qualified as a deduction had commercial deposits not yet been established in that area
• The practical effect is to disallow deductions for intangible drilling costs of production wells, since such costs are treated as capital in nature
• Disallowed costs instead qualify for mineral extraction capital allowances under Part 5 of the Capital Allowances Act 2001