CA23140 - Plant and Machinery Allowance (PMA): First Year Allowance (FYA): expenditure on energy-saving plant or machinery

CAA01/S45A - S45C and SI2001/2541

Businesses of any size can claim 100% FYAs on capital expenditure on new energy-saving plant or machinery. The normal exclusions CA23110 apply, except that between 17 April 2002 and 1 April 2006, expenditure on energy-saving plant or machinery for leasing could also qualify for these FYAs. However, from 1 April 2006, only expenditure on energy-saving plant or machinery for leasing under an excluded lease of background P&M can qualify CA23835. Energy-saving plant or machinery is plant or machinery that is included as a qualifying technology or product specified in a Technology List or a Product List. The Secretary of State for the Department of Environment, Food and Rural Affairs issues these. Detailed guidance on this scheme can be found under specialist publications in the Practitioner Zone on the HMRC Internet site.

As a general rule, from 1 April 2012 for corporation tax and 6 April 2012 for income tax, expenditure in respect of plant or machinery that is energy-saving for the purposes of section 45A CAA, does not qualify for FYA if the plant or machinery generates electricity or heat that attracts tariff payments or other incentives under either of the renewable heat incentive or feed-in tariff schemes. In Northern Ireland these changes took effect from 1 April 2013 for corporation tax and 6 April 2013.

In the case of expenditure on those combined heat and power systems which are in receipt of renewable heat incentives these changes do not take effect until 1 April 2014 for corporation tax and 6 April 2014 for income tax, see CA23145. The original Energy Technology List was issued for the launch of the scheme on 1 April 2001. It was superseded by a list, issued on 15 July 2002, which came into effect on 5 August 2002. The current list was issued on 16 July 2008 and came into effect on 11 August 2008. Details of the lists and the dates they took effect are set out below:

Issued effect from
15 July 2002 5 August 2002
11 July 2003 5 August 2003
16 July 2004 26 August 2004
18 July 2005 18 July 2005
2 August 2006 7 September 2006
19 July 2007 16 August 2007
16 July 2008 11 August 2008
6 July 2009 4 August 2009
3 August 2010 8 October 2010
1 September 2011 1 October 2011
5 July 2012 2 August 2012
10 July 2013 7 August 2013
3 July 2014 7 August 2013

The Technology List contains the energy efficiency criteria that must be satisfied. The designated technologies are:

  • Combined heat and power (CHP)
  • Boilers and boiler add ons (including oil-fired boilers added from 5 August 2002)
  • Lighting
  • Pipe insulation
  • Motors
  • Variable speed drives (VSD)
  • Thermal screens - (removed from 7 September 2006)
  • Refrigeration equipment (including display cabinets and compressors added from 5 August 2002)
  • Heat pumps for space heating (from 5 August 2002)
  • Radiant and warm air heaters (from 5 August 2002)
  • Solar thermal systems (from 5 August 2002)
  • Compressed air equipment (from 5 August 2002)
  • Automatic monitoring and targeting equipment (from 5 August 2003)
  • Air-to-air energy recovery equipment (from August 2004)
  • Compact heat exchangers (from August 2004 ) removed October 2010
  • Heating, ventilation and air conditioning zone controls (from August 2004)
  • Uninterruptible power supplies (from October 2010)
  • High speed hand air dryers (from October 2011)

The Technology List sometimes requires that:

  • design and/or installation of the plant or machinery has been certified as meeting the relevant technology standards by the Secretary of State or the relevant department of the devolved administrations, or
  • the plant or machinery is a product specified on the Product List.

Expenditure incurred on a technology that is subject to the issue of a certificate can qualify for 100% FYAs even if it was incurred before the certificate was issued but the claim cannot be made until certification is given. For example, expenditure incurred on 24 May 2001 on a technology whose certificate was not issued until 4 July 2001 qualifies for 100% FYAs but those FYAs may not be claimed until 4 July 2001, the certification date.

Sometimes a manufacturer has to certify that its product satisfies the relevant criteria. These products will be listed in the Product List. A product only gets onto the product list if satisfies the relevant criteria in the Technology List. At present this applies to all of the technology groups, with the exception of CHP, lighting, air source split and multi split (including variable refrigerant flow) heat pumps and pipe work insulation.

Products on the Product List may be incorporated into other items of plant or machinery. In such a case you have to identify the proportion of the expenditure incurred by the purchaser which can qualify for 100% FYA. You do that using tables included as part of the Product List. These specify the deemed expenditure that will qualify for 100% FYA to be attributed to a particular product when it is incorporated into other equipment.

This is the basic rule for allocating the expenditure incurred on the equipment containing the qualifying product (or products). The proportion of the expenditure incurred on the provision of the plant and machinery that qualifies for 100% FYA will be the amount specified in the Product List for the particular product included in that plant or machinery. The balance of the expenditure incurred does not qualify for 100% FYA under these rules but it can still qualify for capital allowances at the normal rate.

If the total expenditure incurred on the equipment containing the qualifying product is less than the amount specified in the Product List for the qualifying product incorporated in that equipment, the total expenditure qualifies for 100% FYA.

Where the expenditure on the equipment is incurred in stages, allocate the expenditure qualifying for 100% FYA evenly between each stage. Do this by comparing the total expenditure to be incurred with the expenditure that will qualify for 100% FYAs. Apply this fraction to each payment to get the part of each payment that qualifies for 100% FYAs.

Example Bob buys a piece of equipment costing £90,000 that incorporates an item on the product list. The amount on the product list for the part incorporated in the equipment is £18,000. He pays for the equipment in three instalments - one of £40,000 and two of £25,000. The parts of the payments that qualify for 100% FYA are £8,000 = £40,000 x £18,000 / £90,000 and £5,000 = £25,000 x £18,000 / £90,000.

If a certificate is revoked the taxpayer should amend the relevant return to withdraw any 100% FYA claimed.