CA23157 | Plant and Machinery Allowance (PMA): First Year Allowance (FYA): expenditure on North Sea oil ring-fence plant and machinery

CAA01/S45F, FA08/S102, FA21/S9

Capital expenditure on the provision of plant or machinery qualifies for 100% FYAs if it is incurred by a company wholly for the purpose of a trade of extraction of oil or gas in the UK or UK Continental Shelf (a ‘ring-fence’ trade) which is subject to the supplementary charge for ring fence trades.

There are also special 100% FYAs for mineral extraction under the code for Mineral Extraction Allowances (CA50000).

Expenditure incurred 1 April 2021 - 31 March 2023 which is partly for the purposes of a ring-fence trade

FA21/S9 temporarily introduces a new 100% first-year allowance for expenditure on the provision of plant or machinery for use partly for the purposes of a ring fence trade and partly for the purposes of another qualifying activity. A claim to a first-year allowance should be allocated between the ring-fence trade and the other qualifying activity on a just and reasonable basis.

The conditions for qualifying expenditure to be first-year qualifying expenditure are as follows:

• it is incurred on or after 1 April 2021 but before 1 April 2023

• it is incurred by a company within the charge to corporation tax

• it is not within any of the general exclusions in CAA01/S46(2)

• it is not special rate expenditure.

This first-year allowance has effect as if it were contained in CAA01/Part 2 Chapter 4 which means normal first-year allowance rules apply when determining eligibility. There is guidance on first-year allowances at CA23100 onwards.