OT21231 - Corporation Tax Ring Fence and Supplementary Charge

First-year Allowances for a Ring Fence Trade: Plant and Machinery: General Rules CAA01/s45F

The basic conditions for expenditure to be first-year qualifying expenditure are set out in CAA01/s45F(1). It must be

• incurred on or after 17 April 2002
• incurred by a company
• incurred on the provision of plant or machinery for use wholly for the purposes of a ring fence trade ( OT21235)
• not be excluded by CAA01/s46 (general exclusions).

There are eight exclusions in CAA01/s46(2) (CA23110). These prevent first-year allowances being given for certain expenditure. The two most likely to be met in ring fence trades are expenditure on ships and plant or machinery for leasing. Note that the definition of ships (CAA01/s94) excludes offshore installations, which term is likely to include most Floating, Production Storage and Offloading Vessels. FPSOs may therefore qualify for first-year allowance at 100%, or 24% if they are long life assets.

First-year allowances are not due on decommissioning expenditure, because such expenditure is not on the provision of plant or machinery. Much decommissioning expenditure will qualify for 100% relief under other provisions (Ss 163-165 CAA01) but, where it doesn't, e.g. because incurred in mid field life, only 25% writing-down allowances will be due.

Ring fence first-year allowances are restricted to trades subject to the supplementary charge - CAA01/s45F(3). So, for example, leasing trades will not be eligible for these first-year allowances.