Income Tax (Trading and Other Income) Act 2005 section 240CA

Unrelieved qualifying expenditure: Part 5 of CAA 2001

Section 240CA provides a deduction for unrelieved mineral extraction capital allowances when a person carrying on a mineral extraction trade moves from the accruals basis to the cash basis of accounting.

• When a mineral extraction trader enters the cash basis, they may claim a deduction for capital expenditure that has not yet been fully relieved through mineral extraction allowances under Part 5 of the Capital Allowances Act 2001.
• The deduction covers expenditure that would have remained as unrelieved qualifying expenditure but for the rule in section 419A(1) of CAA 2001 that removes entitlement to capital allowances on entering the cash basis.
• The expenditure must be of a type that would qualify for a deduction under cash basis rules, on the assumption that it was paid in the current tax year.
• This section does not apply where section 240D applies, which deals separately with assets that have not been fully paid for at the time of entering the cash basis.