Businesses can claim first year allowances (FYAs) on certain types of plant and machinery. FYAs allow the business to claim up to 100% of the expenditure incurred. There are, however, some exclusions, for example for expenditure on long-life assets and expenditure on plant or machinery for leasing. In contrast to the 100% allowance permitted for the annual investment allowance, there is no limit on expenditure qualifying for FYAs.
Where expenditure is incurred on certain energy or environmentally beneficial plant and machinery qualifying as FYA, there is the opportunity to surrender losses generated by the allowances in return for a tax repayment. Energy and environmentally beneficial allowances are known as ECAs. Qualifying expenditure for ECAs is restricted to assets listed on the energy technology list and the water technology list, both of which were updated on 5 July 2012. Broad headings are:
- energy efficient plant and equipment (ECA)
- CO2 efficient cars
- zero emission goods vehicles
- plant or machinery for gas refuelling stations
- water efficient technology (ECA).
Claiming these allowances can be particularly valuable, given that the writing down allowances (WDAs) for the main pool attract a deduction of 18% per annum, and many categories of plant and machinery will now be categorised as 'integral features' which attract 8% WDA.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.