CA23153 - 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 CO2 emissions of not more than 110gm per km driven.
  • the expenditure is incurred between 17 April 2002 and 31 March 2013.

The 110gm per km driven limit applies to cars bought on or after 1 April 2008. For cars bought before that date the limit was not more than 120gm 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 FA02/Sch19 which inserts a new Section 45D into CAA01. The legislation was amended by FA2008, which extended the time when expenditure must be incurred to qualify for this 100% FYA so that it ends on 31 March 2013. FA08 also reduced the emissions limit from 120 to 110gm per km driven.

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.