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HMRC internal manual

Capital Allowances Manual

Plant and Machinery Allowance (PMA): First Year Allowance (FYA): expenditure on cars with low carbon dioxide emissions

Businesses of all sizes can claim 100% FYAs on capital expenditure on a car provided that:

  • the car is ‘unused and not second hand’, and is first registered on or after 17 April 2002;
  • it is an electric car, or
  • a car with qualifying CO2 emissions of not more than a specified amount.
  • the expenditure is incurred between 17 April 2002 and 31 March 2015.


The qualifying CO2 emissions have been reduced since the allowance was introduced. For the period:

  • 17 April 2002 to 31 March 2008 the limit was 120gm per km driven
  • 1 April 2008 to 31 March 2013 the limit was 110gm per km driven.
  • 1 April 2013 to 31 March 2015 the limit was 95gm per km driven.
  • 1 April 2016 to 31 March 2018 the limit was 75gm per km driven
  • 1 April 2018 to 31 March 2021 the limit is 50gm per km driven

New cars are ‘unused and not second hand’. You should accept a car is unused and not second hand even if it has been driven a limited number of miles for the purposes of testing, delivery, test driven by a potential purchaser, or used as a demonstration car. A car’s carbon dioxide emissions figure is shown on the vehicle registration document (the ‘V5’). Emissions figures for most makes and models can be obtained from the:

  • HMRC internet site for CO2 emissions;
  • Vehicle Certification Agency’s website at


Detailed guidance on this scheme can be found under specialist publications in the Practitioner Zone on the HMRC Internet site.

The definition of a car follows the normal meaning in CAA01/S81 (applicable for expenditure before 1 or 6 April 2009) or CAA01/S268A (applicable for expenditure on or after 1 or 6 April 2009) (CA23510). Expenditure on a taxicab can also qualify for 100% FYAs if the cab meets the conditions above, even if it is not a car within the meaning of Section 81 or Section 268A.

The legislation is in FA02/S59 and Section 45D into CAA01. The legislation has been amended by FA2008, FA13 which extended the time when expenditure must be incurred to qualify for this 100% FYA and also reduced the emissions limit.

Changes to the rules for cars costing more than £12,000

The special rules for pre-April 2009 expenditure on cars that cost more than £12,000 (CA23520) do not apply to qualifying cars with low CO2 emissions. This means the annual writing-down allowances are not restricted to £3,000, and there is no restriction to the car hire or leasing expenses a business can deduct for tax purposes.

You may have a case where a car that was leased out before 1 April 2008 satisfied the emissions limit when the leasing began but does not satisfy the reduced limit that applies from 1 April 2008. The car is still exempt from the lease rental restriction until the leasing contract ends. Once that contract ends any future leases of the car will be subject to the lease rental restriction.