Income Tax (Trading and Other Income) Act 2005 section 166

Allocation of site preparation expenditure

Section 166 sets out the formula for spreading a waste disposal trader's site preparation expenditure over the useful life of the site, allocating a proportion to each accounting period based on how much of the site's capacity has been used up.

• The allowable deduction for each period is calculated using the formula: residual expenditure × (waste deposited in the period ÷ (remaining site capacity + waste deposited in the period)).
• Residual expenditure is total site preparation costs to date, less any amounts already relieved through capital allowances or deductions claimed in earlier periods.
• For traders who started before 6 April 1989, a portion of pre-1989 unrelieved expenditure must also be excluded from residual expenditure using a separate formula based on pre-1989 site usage.
• Most waste disposal sites have a life of only four or five years, but the rules preserve the treatment of older pre-1989 expenditure, which is particularly relevant for sites such as those in the nuclear waste industry.