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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowance (PMA): First Year Allowance (FYA): expenditure on which available and rates

CAA01/S39

Current FYA schemes

Currently, FYA is available at the 100% rate for expenditure incurred:

  • on environmentally beneficial CA23135 and energy-saving CA23140 technologies, including by energy services providers CA23150 (until 1/6 April 2020);
  • on zero-emission goods vehicles CA23145;
  • on plant and machinery for use in a designated assisted area;
  • on cars with low CO2 emissions CA23153;
  • on new plant and machinery installed at a gas refuelling station to refuel vehicles with natural gas, biogas or hydrogen fuel CA23155;
  • on plant or machinery for an electric vehicle charge point CA23156; and
  • on plant or machinery for use wholly in a North Sea ring fence trade CA23157.

 

Repealed FYA schemes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  • by small and medium-sized enterprises (SMEs) at the 40% or 50% rate (repealed with effect from 1/6 April 2008).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.

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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 a FYA, the expenditure must have actually been incurred during the period in which the FYA is in force.

 

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.

 

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General exclusions

CAA01/S46

FYA is not available for the following:

  • expenditure incurred in the chargeable period in which the qualifying activity is discontinued;
  • expenditure incurred on the provision of a car, unless it is a qualifying car with low CO2 emissions CA23153;
  • expenditure excluded from long life asset treatment by the transitional provisions in CAA01/Schedule 3, Paragraph 20;
  • expenditure incurred on the provision of plant or machinery for leasing* unless the expenditure is on qualifying energy-saving plant and machinery CA23140, cars with low CO2 emissions CA23153, or environmentally beneficial plant or machinery CA23135 and the lease is an excluded lease of background plant or machinery for a building CA23835;
  • an asset received as a gift;
  • an asset brought into use for the purposes of a qualifying activity having been acquired for something else, including leasing under a long funding lease;
  • an asset provided in connection with a change in the nature or conduct of a business carried on by someone else and the main benefit, or one of the main benefits, that could reasonably be expected from the change is obtaining an FYA. This is anti-avoidance legislation.

*The leasing exclusion applies whether the leasing is in the course of a qualifying activity or otherwise, so activities like special leasing are caught. That means that assets in properties let out by the taxpayer are excluded from FYAs. Treat letting a ship on charter or any other asset on hire as leasing. The leasing exclusion also applies to software acquired for licensing or sub-licensing. It does not apply where a person lets another person use software without granting a licence or sub-licence. For example, it does not apply where a person lets another person use software that does no more than allow access to the internet, order goods, or view advertising. In a case like that no rights have been granted and there is no licence or sub-licence.

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.