CA23164 | Plant and Machinery Allowance (PMA): First Year Allowance (FYA): Super-Deduction and Special Rate (SR) Allowance: Expenditure incurred on or after 1 April 2021 but before 1 April 2023

FA21/S9(6)-(7)

FA21/S9 has effect as if it were contained in CAA01/PART2/CH4 and so the provisions of CAA01 which determine when capital expenditure is incurred, such as CAA01/S5 CA11800 and S50, apply.

Pre-commencement expenditure and FYAs

There is guidance on the application of CAA01/S50 to first-year allowances at CA23110. The effect of CAA01/S12 CA23020 is ignored when deciding whether expenditure is incurred on or after 1 April 2021 but before 1 April 2023. To be super-deduction expenditure or SR allowance expenditure, the expenditure must have actually been incurred on or after 1 April 2021 but before 1 April 2023.

Contracts entered into before 3 March 2021 – CAA01/S5 disapplied

Expenditure incurred as a result of a contract entered into before 3 March 2021 is treated as incurred when the contract was entered into for the purposes of determining whether expenditure is super-deduction expenditure or SR allowance expenditure.

Example

Alpha Ltd entered into a contract to purchase a machine on 1 February 2021 and the unconditional obligation to pay arose on 1 April 2021. When considering the requirement for expenditure to be incurred on or after 1 April 2021 and before 1 April 2023, as the expenditure was incurred as a result of a contract entered into before 3 March 2021, Alpha Ltd is treated as incurring the expenditure on 1 February 2021. The expenditure is not super-deduction expenditure or SR allowance qualifying expenditure.

You may need to decide whether expenditure has been incurred under a contract. There is general guidance on contracts at CA11700.

Applying this rule will be very fact-specific and you should review all the relevant contracts to ensure that expenditure has not been incurred under a pre-3 March 2021 contract.