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United Kingdom

19.A15. Under the United Kingdom Capital Allowances Act 1968, a ‘writing-down’ allowance is available in respect of expenditure on exploration. No distinction is made between the treatment of exploration and development expenditure for the purposes of this allowance, though certain other allowances made in respect of development expenditure (e.g. the initial allowance referred to later) are not made available in connection with exploration expenditure. The writing-down allowance closely resembles section 122D of the Australian Act in that exploration and development expenditure may be amortised over the life of the mine. Further, it is available to taxpayers carrying on a business which consists of or includes the working of a mine. It is computed by applying to the residue of qualifying expenditure the quotient obtained when the output of the mine in the tax period is divided by the total estimated output of the mine (or one-twentieth, whichever is the greater).

19.A16. This allowance extends to abortive exploration expenditure (which is immediately deductible as a business expense if taxpayer carries on a mining business) and expenditure on machinery or plant used for exploration. Where the mine ceases to be worked, the person carrying on the trade may elect that the writing-down allowances, if any, for any assessable year which begins within six years before that event shall be revised. If he so elects, the writing-down allowance for that (or those) period(s) is revised, so that it is computed with the substitution of the actual output of the mine in lieu of the previous estimate.

19.A17. A depletion allowance is available with regard to the costs of acquiring a mine in lieu of a write-off. (The amount of the allowance varies from 50 per cent to 10 per cent of the royalty value of output according to the length of the period between acquisition and production.) However, the cost of acquiring a mine or mining rights


  ― 322 ―
outside the United Kingdom may be made the subject of a write-off allowance under the provisions outlined above.

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