Extension of first year allowances for zero-emission goods vehicles and gas refuelling equipment
Published 22 November 2017
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This publication is available at https://www.gov.uk/government/publications/extension-of-first-year-allowances-for-zero-emission-goods-vehicles-and-gas-refuelling-equipment/extension-of-first-year-allowances-for-zero-emission-goods-vehicles-and-gas-refuelling-equipment
Who is likely to be affected
Businesses incurring expenditure from April 2018 on the acquisition of zero-emission goods vehicles or gas refuelling equipment for use in their business.
General description of the measure
The measure extends the 100% First Year Allowance (FYA) for businesses purchasing zero emission goods vehicles or gas refuelling equipment for a further 3 years.
Policy objective
This measure is designed to support transition in the UK to cleaner zero and ultra-low emission vehicles which will help improve air quality in the UK’s towns and cities and protect the environment for the next generation.
Background to the measure
At Budget 2015, the government announced an extension to both schemes to end on 31 March 2018.
Although there has been no formal consultation, this policy was designed in discussion with business to keep the overall compliance costs for businesses as low as possible.
Detailed proposal
Operative date
For zero-emission goods vehicles the three year extension will apply to qualifying expenditure incurred on or after 1 April 2018 for Corporation Tax (CT) and 6 April 2018 for Income Tax. The scheme will end on 31 March 2021 for CT and 5 April 2021 for Income Tax.
For gas refuelling equipment the three year extension will apply to expenditure incurred on or after 1 April 2018 for CT and Income Tax. The scheme will end on 31 March 2021 for both CT and Income Tax.
Both schemes will be extended by secondary legislation.
Current law
Business capital expenditure on plant and machinery normally qualifies for tax relief as Capital Allowances (CAs). CAs are normally given at the rate of 18% a year on a reducing balance basis.
Under current law, 100% FYAs are available to businesses that purchase:
- zero-emission goods vehicles – sections 45DA and 45DB Capital Allowances Act 2001 (CAA). These allowances are due to end on 31 March 2018 for CT and 5 April 2018 for Income Tax
- gas refuelling equipment required to refuel natural gas, biogas and hydrogen powered vehicles – section 45E CAA
These allowances are due to end on 31 March 2018 for both CT and Income Tax.
Proposed revisions
A statutory instrument will be laid to extend the availability of FYAs for zero-emission goods vehicles to 31 March 2021 for persons within the charge to CT and 5 April 2021 for Income Tax.
A statutory instrument will be laid to extend the availability of FYAs for gas refuelling equipment to 31 March 2021 for persons within the charge to CT and Income Tax.
Summary of impacts
Exchequer impact (£m)
| 2017 to 2018 | 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 |
|---|---|---|---|---|---|
| - | -5 | -5 | -5 | - | - |
This costing has been certified by the Office for Budget Responsibility and will be included in their forecast at the next fiscal event.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
Any extension to the FYA regime should have no impact on individuals or households as capital allowances can only be claimed on qualifying expenditure incurred by businesses.
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
This measure does not impact on the equality of groups with protected characteristics.
Impact on business including civil society organisations
This measure is expected to benefit approximately 100 businesses each year who will be able to claim first year allowances for zero-emission goods vehicles or gas refuelling equipment up until 31 March 2021 or the 5 April for Income Tax. Businesses may already submit claims for this investment under the Annual Investment Allowance if the threshold is not exceeded. The allowance for zero-emission goods vehicles is only available to businesses that have not already received any plug-in grants due to state aid rules.
The impact on businesses administrative burdens is expected to be negligible as this measure only extends the end date of the existing policy. One-off costs include familiarisation with the new rules. It is not expected that there will be any on-going costs.
There is no impact on civil society organisations
Operational impact (£m) (HM Revenue and Customs (HMRC) or other)
It is anticipated that there will be no significant operational impacts on HMRC arising from this measure with no software changes required.
Other impacts
This measure has a behavioural effect to encourage businesses to purchase zero-emission vehicles. This will support the objective of reducing emissions from vehicles.
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected taxpayer groups.
Further advice
If you have any questions about this change, please contact Tunde Ojetola on Telephone: 03000 585916 or email: tunde.ojetola@hmrc.gsi.gov.uk.