Income Tax (Trading and Other Income) Act 2005 section 62

Limit on deductions if tenant entitled to mineral extraction allowance

Section 62 prevents a tenant from claiming a double tax benefit where they have already received a mineral extraction allowance under the Capital Allowances Act 2001 for expenditure on acquiring an interest in the land subject to their lease.

• Where a tenant has received a mineral extraction allowance for expenditure on acquiring a mineral asset under the land subject to the taxed lease, the deduction available under section 61 is restricted to prevent double relief
• If the allowance covers the whole of the acquisition expenditure, no section 61 deduction is available for that tax year or any later tax year
• If the allowance covers only part of the expenditure, the section 61 deduction is reduced using the formula (WE − AP) ÷ WE, where WE is the whole expenditure and AP is the allowable part
• The restriction applies from the tax year in which the mineral extraction allowance is first given and continues into all subsequent tax years