CA23174AB - Plant and Machinery Allowance (PMA): First Year Allowance (FYA): Full expensing and 50% allowance for special rate expenditure: Qualifying expenditure

CAA01/S45S

The following conditions must be met for expenditure to qualify for full expensing or the 50% FYA:

  • it is incurred on or after 1 April 2023;
  • it is incurred by a company within the charge to corporation tax;
  • the plant or machinery must be unused and not second-hand; and
  • the expenditure is not within any of the general exclusions in CAA01/S46(2) CA23174AC.
The date expenditure is incurred

The provisions of CAA01 which determine when capital expenditure is incurred apply, such as CAA01/S5 CA11800.

Pre-commencement expenditure and FYAs

There is guidance on pre-commencement expenditure and FYAs at CA23110. The effect of CAA01/S12 CA23020, which treats pre-commencement expenditure as incurred on the first day that the qualifying activity commences, is ignored when deciding whether expenditure is incurred on or after 1 April 2023. To qualify for full expensing or the 50% FYA, the expenditure must have actually been incurred on or after 1 April 2023.

Company within the charge to corporation tax

There is guidance on whether partnerships are eligible for FYAs available to companies within the charge to corporation tax at CA11145.

Plant or machinery is unused and not second-hand

You can accept that plant or machinery is unused and not second-hand even if it has undergone some limited use for the purposes of testing, delivery or demonstration.

Example – Full Expensing

Hunter and Ball Ltd has a calendar year accounting period. On 6 January 2024, it incurs £25m of qualifying expenditure on new main rate plant and machinery for use in its construction business. In its accounting period ended 31 December 2024, Hunter and Ball Ltd claims full expensing in the amount of £25m.

Example – 50% FYA

Hunter and Ball Ltd also decides to install a new heating system at its head office. On 24 April 2025, it incurs £10m of qualifying expenditure on the new heating system which is special rate expenditure. Hunter and Ball Ltd claims the 50% FYA in respect of all of the expenditure, which amounts to a £5m claim in the accounting period ended 31 December 2025. In the subsequent accounting period ending 31 December 2026, Hunter and Ball Ltd adds the remaining £5m to the special rate pool and claims WDAs.