CA23110 - Plant and Machinery Allowance (PMA): First Year Allowance (FYA): expenditure on which available and rates
CAA01/S39, S50, S52
Current FYA schemes
Currently, FYA is available at the 100% rate for expenditure incurred on:
- zero-emission goods vehicles CA23145
- plant and machinery for use in a designated assisted area
- plant and machinery for use in a special tax site CA23121
- cars with low CO2 emissions CA23153
- new plant and machinery installed at a gas refuelling station to refuel vehicles with natural gas, biogas or hydrogen fuel CA23155
- plant or machinery for an electric vehicle charge point CA23156
- plant or machinery for use wholly in a North Sea ring fence trade CA23157.
Three new temporary FYAs, the 130% ‘super-deduction’, 50% special rate allowance and the 100% FYA for expenditure on the provision of plant and machinery partly for use in a ring-fence trade, were introduced by Finance Act 2021 for expenditure incurred on or after 1 April 2021 but before 1 April 2023 - see from CA23161.
The Finance (No.2) Act 2023 introduced two new FYAs, a 100% FYA known as full expensing and a 50% FYA for special rate expenditure, for expenditure incurred on or after 1 April 2023 – see from CA23174A
Repealed FYA schemes
Historically, FYAs were available for expenditure incurred:
- for Northern Ireland purposes by small or medium-sized enterprises (SMEs), between 12 May 1998 and 11 May 2002, at the 100% rate;
- on information and communications technology (ICT) by small enterprises between 1 April 2000 and 31 March 2004 at the 100% rate;
- by small and medium-sized enterprises (SMEs) at the 40% or 50% rate (repealed with effect from 1/6 April 2008). The 50% rate applied for the years ended 31 March (CT)/5 April (IT) 2005; 31 March(CT)/5 April (IT) 2007; and 31 March(CT)/5 April (IT) 2008. At other times the 40% rate applied;
- in the twelve month period beginning 1 April 2009 (CT) / 6 April 2009 (IT), at the 40% rate (temporary FYA) for plant and machinery expenditure that would normally be allocated to the main pool.
- environmentally beneficial CA23135 and energy-saving CA23140 technologies, including by energy services providers CA23150 (until 1/6 April 2020).
Pre-commencement expenditure and FYAs
Normally, expenditure incurred before a qualifying activity begins is treated as incurred on the first day that the person who incurred the expenditure carries on the qualifying activity CA23020 (CAA01/S12). Ignore this rule when you decide whether the expenditure incurred qualifies for a particular FYA. To qualify for an FYA, the expenditure must have actually been incurred during the period in which the FYA is in force (CAA01/S50).
However, the date that the pre-commencement expenditure was actually incurred is only relevant for the purposes of deciding whether expenditure is FYA qualifying. For the purposes of claiming the FYA, the FYA qualifying expenditure is then treated as incurred on the day that the qualifying activity begins CA23020 (CAA01/S12), meaning that the FYA can only be claimed in the chargeable period in which that date falls (CAA01/S52).
Example
Black Diamond Bay Limited incorporated on 1 January 2023 as a manufacturer specialising in neck ties and Panama hats. In the period 1 January 2023 to 31 March 2023 they incur setting-up expenditure, including the purchase of a brand new hat blocking machine on 1 February 2023 at a cost of £250,000. The company starts trading on 1 April 2023 and draws up its first accounts to 31 March 2024.
The expenditure of £250,000 is super-deduction first year allowance qualifying expenditure, having been actually incurred on 1 February 2023 and in the period that the super-deduction was available (1 April 2021 to 31 March 2023). For making the claim to capital allowances the expenditure is now treated as having been incurred on 1 April 2023. The company may claim the super-deduction in its accounting period ended 31 March 2024, despite the super-deduction not being available for expenditure incurred on or after 1 April 2023. This is because we have already established that the expenditure is super-deduction qualifying expenditure.
Because the chargeable period in which the relief is claimed ends on or after 1 April 2023, the company is entitled to claim a reduced super-deduction as determined by applying the rules described at CA23168.
Ownership of the asset and partial FYA claims
FYA is only available if the asset is owned by the taxpayer at some time during the chargeable period for which the FYA is claimed.
If FYA is available it can be claimed on part of the qualifying expenditure. If that happens the part on which FYA is not claimed can be added to the pool for that year.
Example
Eric bought a car with low CO2 emissions for £50,000.
It qualified for FYA at the 100% rate.
He did not want the full £50,000 FYA that was available and claimed FYA of £30,000.
He was entitled to add the remaining £20,000 to the pool for the same chargeable period.