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CA23153 | Plant and Machinery Allowance (PMA): First Year Allowance (FYA): expenditure on electric cars and cars with zero carbon dioxide emissions

From HM Revenue & Customs · Capital Allowances Manual

Cars do not qualify for annual investment allowance, super-deduction, full expensing or 50% first-year allowances. Instead, the capital allowance treatment of capital expenditure on a car depends on its carbon dioxide emissions (see CA23535 for an outline of the rules).

A 100% FYA is available for capital expenditure on the provision of a car if:

  • 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 qualifying CO2 emissions of not more than a specified amount (from 1 April 2021 the limit is 0gm per km driven. Limits for previous years can be found at ‘Claim capital allowances – Business Cars’, gov.uk) ;

  • the expenditure is incurred between 17 April 2002 and

    • 31 March 2027 for Corporation Tax purposes, or

    • 5 April 2027 for Income Tax purposes; and

  • the expenditure is not excluded by the general FYA exclusions in CAA01/S46, see CA23113.

A hybrid car will not qualify for this 100% FYA because alongside its electric motor, it includes an internal combustion engine which produces CO2 emissions.

Meaning of '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.

The fact that such cars (or cars that have not been driven at all) may have been pre-registered to a dealer does not prevent you from treating them as 'unused and not second hand.'

How to establish a car's carbon dioxide emissions figure

For information about emissions figures, see CA23545.

Definition of 'car'

For the purpose of the 100% FYA the term ‘car’ follows the definition in CAA01/S268A, see CA23510, but is also extended to a vehicle ‘of a type commonly used as a hackney carriage’ (a traditional ‘London black cab’ type of vehicle). In other words, a hackney carriage will qualify for the 100% FYA if it meets the conditions above even though it would not be regarded as a car for other capital allowance purposes, such as the exclusion from the Annual Investment Allowance.