Businesses can claim a 100% first-year allowance (FYA) on the purchase of certain qualifying Plant and Machinery (P&M). The cash-flow benefit of accelerated tax relief is designed to encourage businesses to invest in capital items which help reduce their carbon footprint by being energy and water efficient. The list of qualifying items includes expenditure on new unused electric vehicles and other cars within the 50g/km threshold for low CO2 emissions.
The list also includes:
The use of the FYA allows companies to set the full cost of qualifying P&M against their tax bills in the year of purchase. The FYA is only available on the purchase of new qualifying cars, second-hand cars do not qualify for FYAs (but writing down allowances can be claimed).
If claiming the full amount of FYA would create a loss, it is also possible to claim less than the full 100% FYA and claim the balance using writing down allowances.
Obviously there are a range of non-tax issues that need to be considered if you are advising clients on these issues, prior to investing in new equipment or vehicles. Hopefully, this post will clarify one raft of tax allowances that you could consider.