CA23195A - Plant and Machinery Allowance (PMA): First-Year Allowance (FYA): 40% First-Year Allowance: Conditions

Section 45U CAA01

A 40% FYA is available for qualifying expenditure incurred on the provision of plant or machinery, which meets the following conditions:

  • It is incurred on or after 1 January 2026,
  • It is not special rate expenditure,
  • The plant or machinery must be unused and not second-hand,
  • The expenditure is not within any of the general exclusions in Section 46(2) CAA01 such as the exclusion of expenditure on the provision of a car, though the exclusion for expenditure on the provision of plant or machinery for leasing is disapplied in certain circumstances, and
  • The expenditure is not incurred under disqualifying arrangements (CA23195E).

The 40% FYA is available to persons within the charge to Corporation Tax or Income Tax. Mixed partnerships are able to claim the 40% FYA in respect of both corporate and non-corporate members (see CA11145).

The date expenditure is incurred

The provisions of CAA01 which determine when capital expenditure is treated as incurred apply, such as Section 5 CAA01 (CA11800).

Pre-commencement expenditure and FYAs

There is guidance on pre-commencement expenditure and FYAs at CA23110. The effect of Section 12 CAA01 (CA23020), which treats pre-commencement expenditure as incurred on the first day that the qualifying activity commences, is ignored when deciding whether expenditure is incurred on or after 1 January 2026. To qualify for the 40% FYA, the expenditure must have actually been incurred on or after 1 January 2026.

Special rate expenditure

CA23210 explains what expenditure is treated as special rate. Special rate expenditure does not qualify for the 40% FYA. Special rate expenditure may qualify for other PMAs such as the AIA (CA23080) or the 50% FYA for special rate expenditure (CA23174A).

Plant or machinery is unused and not second-hand

You can accept that plant or machinery is unused and not second-hand even if it has undergone some limited use for the purposes of testing, delivery or demonstration. Guidance on how to apply this condition in the context of full expensing and the 50% FYA for special rate expenditure is at CA23174AB, which applies in the same way for the 40% FYA.

General exclusions from FYAs

All of the general exclusions from FYAs set out in Section 46(2) CAA01 apply to the 40% FYA, subject to a broad exception from general exclusion 6 which excludes expenditure on the provision of plant or machinery for leasing (see CA23195B). There is guidance on the general exclusions at CA23113.

Expenditure on the provision of a car

Expenditure incurred on the provision of a car is not eligible for the 40% FYA. CAA01/S268A defines a car for the purposes of capital allowances and there is guidance at CA23510.