CA23174AC - Plant and Machinery Allowance (PMA): First Year Allowance (FYA): Full expensing and 50% allowance for special rate expenditure: General Exclusions from FYAs

CAA01/S46

All of the CAA01/S46(2) general exclusions from FYAs apply to full expensing and the 50% FYA, subject to an exception from General exclusion 6, the leasing exclusion, for background plant and machinery (see below). There is guidance on the general exclusions at CA23113. The following additional guidance may be particularly relevant when considering claims to full expensing and the 50% FYA.

General exclusion 2 – expenditure on the provision of a car

Expenditure incurred on the provision of a car is not eligible for full expensing or the 50% first-year allowance. CAA01/S268A defines a car for the purposes of capital allowances and there is guidance at CA23510.

General exclusion 5 – long-life asset expenditure

The effect of General Exclusion 5 is sometimes misunderstood. It does not prevent long-life asset expenditure from qualifying for FYAs. It only excludes expenditure that would be long-life asset expenditure but for transitional provisions in CAA01/SCH3/PARA20. In practice, you may find it helpful to disregard General Exclusion 5 as it will only apply to expenditure that is already excluded from full expensing and the 50% FYA under other conditions (either because the expenditure was incurred before 1 April 2023 or because the plant or machinery is second hand). Long-life asset expenditure (see CA23700) is within the scope of the 50% FYA as long as the standard conditions are met.

General exclusion 6 – plant or machinery for leasing

Expenditure on the provision of plant or machinery for leasing is excluded from the scope of full expensing and the 50% FYA. CA23113 provides further guidance on General Exclusion 6. There is a distinction between the leasing or hiring of an asset and the provision of services that involve the use of an asset (CA23115).

Background plant or machinery in building for leasing

CAA01/S46(4A) contains an exception to general exclusion 6 (expenditure on the provision of plant or machinery for leasing) where the lease is an “excluded lease of background plant or machinery for a building” as defined by CAA01/S70R CA23835.