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HMRC internal manual

Employment Income Manual

Deductions from earnings: capital allowances: calculating the allowances due: first year allowances: rates of first year allowance

The 40% or 50% FYAs were withdrawn in respect of expenditure incurred on or after 6 April 2008 (for IT purposes) and were replaced by the Annual Investment Allowance (AIA).

The rate of first year allowance which applies depends on when the plant or machinery was purchased, and where it is to be used, as shown in the table below.

| Type of plant/machinery, and where item to be used | Qualifying period (all dates inclusive) | Rate of FYA | | ——————————————————————————————————————————————————————————————————————————————————- | ———————————————————————————————————————— | ———————————- | | Most items acquired primarily for use in Northern Ireland (see below for exceptions) | 12 May 1998 to 11 May 2002
12 May 2002 onwards | 100%
Use “elsewhere” rate, below | | Items acquired for use elsewhere (and Northern Ireland items to which the 100% FYA does not apply) -but see below for computer equipment | 2 July 1998 to 5 April 2004
6 April 2004 to 5 April 2005
6 April 2005 to 5 April 2006
6 April 2006 to 5 April 2008 | 40%
50% | | Computer and communication technology equipment - wherever used (see EIM36730 and EIM36731) | 1 April 2000 to 31 March 2004
(as regards items purchased at any other time, see above) | 100% |

Note that the full first year allowance is due even if the expenditure is incurred part way through the year, or if the employment begins part way through the year. But the allowance must be apportioned if the machinery or plant is used partly for non-business purposes.

The items which are excluded from the 100% first year allowance which applies to items acquired for use primarily in Northern Ireland are:

  • goods vehicles used in a haulage business (it is unlikely that you will see such a claim from an employee) and
  • unauthorised expenditure on items for use primarily in agriculture and fishing businesses - if you see a case where you think this exclusion applies, obtain advice from the IPD Technical Team, Solihull.

See EIM36640 for circumstances where the 100% first year allowance for items acquired primarily for use in Northern Ireland has to be withdrawn.