Enhanced capital allowances
You can claim an enhanced capital allowance (ECA) of 100 per cent of the cost of certain types of equipment in the year that you buy them. These are also known as first-year allowances.
Temporary tax reliefs have been introduced for the period up to 31 March 2023 and introduce an enhanced temporary 130% first-year allowance for main rate assets, and a 50% first-year allowance for special rate assets.
HMRC: Enhanced Capital Allowance
What does the ECA apply to?
These designated types of equipment can be found on the GOV.UK website.
GOV.UK: Capital Allowances Manual
You can write off the whole cost of qualifying equipment against your taxable profits in the period during which you make the investment, thus improving cashflow.
If your business or organisation is liable to Corporation Tax, there are also some special rules that may allow you to surrender losses you make that are attributable to investments in qualifying equipment in return for a cash payment called a first-year tax credit. It is the making of the claim that creates the loss and it is only the loss attributable to the capital allowance claim for these assets that is relevant for the first-year tax credits.
GOV.UK: First year tax credits
To qualify for a first year allowance the equipment must be included as a qualifying technology or product specified in a Technology List or a Product List issued by the Secretary of State for the Department of Energy and Climate Change.
You can't usually claim this allowance for equipment that you buy for leasing out.
If your business or organisation is liable to Corporation Tax, there are also some special rules that may allow you to surrender losses you make that are attributable to investments in qualifying equipment in return for a cash payment called a first-year tax credit. It is the making of the claim that creates the loss and it is only the loss attributable to the capital allowance claim for these assets that is relevant for the first-year tax credits.
Low CO2 emission cars
First-year allowances are available for expenditure on a new electric car, or a new, unused car with CO2 emissions of not more than 110gm per km driven, for expenditure incurred before 31 March 2013, or 65 gm per km for vehicles purchased after April 2013.
HMRC: Capital allowances on Plant and Machinery
GOV.UK: Car fuel data, CO2 and vehicle tax tools
If you purchase an ultra-low emission vehicle you can claim a Plug in Grant of 25 per cent of the cost of the vehicle up to a maximum of £5,000. You can find a list of qualifying cars on the GOV.UK website.
Zero emission goods vehicles
First-year allowances are available up to 31 March 2015 for expenditure on a new and unused goods vehicle with zero emissions. However, there are certain restrictions. If you are intending to acquire a zero emission goods vehicle, please contact the HMRC Capital Allowances Helpline on Tel 020 7147 2610. This is an answerphone with a call-back service.
Vehicle gas refuelling equipment
First-year allowances are available for expenditure on new plant and machinery installed to refuel vehicles with:
- natural gas
- hydrogen
- biogas.
Eligible equipment can include:
- storage tanks
- compressors
- controls and meters
- gas connections
- filling equipment.
The refuelling station does not need to be open to the public or used for cars. For example, an operator of a fleet of commercial vehicles may install a gas refuelling station on its premises to refuel its vehicles.
HMRC: Natural gas and hydrogen gas refueling equipment
You can't usually claim this allowance for equipment that you buy for leasing out.