SE36610 - Deductions from emoluments: capital allowances: calculating the allowances due: first year allowances: general

Section 52 CAA 2001 (previously, Section 22 CAA 1990)

Expenditure on machinery and plant which is necessarily provided for use in the performance of the duties of an office or employment will qualify for a first year allowance if

• the item is not included in the list of exceptions at SE36620 (the main exception is motor cars) and
• the item in question belongs to the employee or office holder at some time during the Income Tax year in which the expenditure was incurred and
• the expenditure was incurred during one of the qualifying periods shown in the table at SE36630 and
• (for 1996/97 and earlier) the expenditure was notified to the Revenue within the time limit set out in SE36860.

Expenditure which does not qualify for a first year allowance may qualify for a writing down allowance instead, as described at SE36650 onwards.

First year allowance and writing down allowance cannot be claimed on the same expenditure for the same year. Where first year allowance is claimed, any balance of expenditure left (the 'residual value') will qualify for a writing down allowance in the following year (see example SE36910). Of course, if a 100 per cent first year allowance is due (see SE36630) the residual value will be nil.

An employee or office holder may decide not to claim a first year allowance, or to claim all or part of the allowance due.

The rates of first year allowance which may be claimed are listed at SE36630.

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 (see SE36570).