Revenue Note for Guidance

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Revenue Note for Guidance




Taxation of profits of certain mines


This Chapter provides special provisions in connection with the taxation of the profits of certain mines.

670 Mine development allowance


This section provides for an allowance to be made to a person carrying on a mining trade in respect of certain capital expenditure on the development of the mine, on construction of mining works and on exploration for and testing of mineral deposits. However, expenditure on the acquisition of the site of the mine or of rights over the deposits do not qualify for relief under this section. Broadly, the section is designed to secure that, year by year over the life of the deposits (which cannot exceed 20 years), allowances will be granted of such an amount that the total of the allowances will be equal to the capital sum expended less the residual value of the assets representing that expenditure when the deposits are exhausted.


Definitions and construction

(1) The term “mine” is defined by reference to the 70 or so minerals listed in the Minerals Development Act, 1940. The definition includes both surface and underground excavation.

The subsection also sets out the qualifying capital expenditure (developing, searching for, discovering or testing deposits, as well as construction works that are likely to have a residual value); and the non-qualifying expenditure (the site, rights over the site or over the deposits and construction works related to further processing of the minerals extracted).

(2) Provision is made for excluding State or other grants in calculating the allowance.

Conditions for allowance

(3) & (4) Expenditure must be incurred after 1946 and any claim for the allowance for a chargeable period must be made within 2 years of the end of the chargeable period.

The allowances

(5) The qualifying expenditure, less the estimated residual value represented by such expenditure, is allowed on a “straight line” basis over the estimated life of the deposits, but this period cannot in any event exceed 20 years.

(6) The allowance to be made to any person carrying on the trade of working a mine is to be made in taxing that trade (that is, in charging the profits of the trade in the case of income tax or in computing trading income in the case of corporation tax). For income tax purposes, any unused allowances for a year of assessment can be carried forward for set-off against trading profits in subsequent years.

(7) The allowance is not granted in respect of any part of the capital expenditure resulting in the creation of assets for which wear and tear allowances can be claimed under section 284.

Denial of deduction under section 85

(8) The annual deduction under section 85 for an industrial building or structure built before 30 September, 1956 cannot be given for a chargeable period for which an allowance in respect of a mine is given under this section.

Pre-trading expenditure

(9) If the capital expenditure is incurred before the trade begins, it is regarded as having been incurred on the first day of trading.

Review of allowances

(10) If the mine ceases finally to be operated, the allowances are reviewed taking account of —

  • the qualifying capital expenditure (a),
  • the allowances already granted (b), and
  • the residual value of the assets represented by the expenditure at the date of cessation (c).

If (b) + (c) is less than (a), the allowance for one or more years is adjusted to give a full allowance over the period for which the mine was worked, and where relevant, any excess tax paid may be repaid notwithstanding the general time limit for making a claim for a repayment of tax set out in section 865.

If (b) + (c) exceeds (a), the excess is treated as a trading receipt arising immediately before the cessation.


(11) If the person who is entitled to the allowance sells any asset representing the qualifying expenditure to another person (other than a person who succeeds the vendor in the trade of working the mine), an adjustment as in subsection (10) is also made.

(12) If the mine is sold to a successor who continues in the trade, the successor can continue to get an allowance in respect of the capital expenditure incurred by the predecessor; but the allowance cannot exceed the amounts which the predecessor would have obtained.

Deemed allowances

(13) If the mining entity was exempt from tax for any period, a mining development allowance is deemed to have been made for such period.


(14) A person aggrieved by decision by an inspector under this section may appeal the decision by notice in writing to the Appeal Commissioners. An appeal must be made within 30 days after the date of the notice of the decision. The Appeal Commissioners will hear and determine an appeal in the manner provided for in Part 40A.

Relevant Date: Finance Act 2021