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HMRC internal manual

Capital Allowances Manual

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HM Revenue & Customs
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Plant and Machinery Allowance (PMA): First Year Allowance (FYA) on energy saving plant and machinery and the renewable heat incentive and feed in tariffs

CAA01/s45AA

The Energy Act 2008 provided for incentives to encourage low carbon energy and heat generation. This Act only applied to Great Britain (England, Wales and Scotland). The Feed-in Tariffs (FITs) scheme was introduced on 1 April 2010 and is designed to incentivise small scale electricity generation. The renewable heat incentive (RHI) supports heat generation from renewable sources, and was introduced in phases starting from November 2011.

Most technologies that qualify under the FITs scheme are not included in the energy technology list (ETL) CA23140. However, many of the technologies that could qualify for tariffs under the RHI scheme, such as boilers and heat pumps, are included in the ETL.

Where feed-in tariffs or renewable heat incentive tariffs are paid (or other incentives given) in respect of electricity or heat generated (or gas or fuel produced) 100% FYAs are not available for expenditure incurred on the plant or machinery that generates or produces it.

As a general rule, this restriction applies for expenditure incurred on or after 1 April 2012 for corporation tax) or 6 April 2012 for income tax. However, where the expenditure is on combined heat and power systems and renewable heat incentive tariffs are paid the restriction only applies from 1 or 6 April 2014. This exemption from the general rule does not apply where the CHP system qualifies for feed-in tariffs.

RHIs were introduced into Northern Ireland in November 2012 (Energy Act 2011). Finance Act 2013 provided that in Northern Ireland where RHIs are paid, 100% FYAs are not available for expenditure incurred from 1 April 2013 for corporation tax and 6 April 2013 for income tax. The legislation also provides that should a Feed-in tariff be introduced FYAs will also be unavailable.

Where the expenditure is on combined heat and power systems and that system qualifies for RHI these changes apply for the whole of the United Kingdom from 1 or 6 April 2014.

Businesses will be able to choose whether to claim the benefit of FYAs or tariff payments etc but will not be able to receive both. Where an FYA is given and a tariff payment or other incentive is subsequently received, then the FYA will be withdrawn by means of an assessment or an amended assessment.