Updated: Jul 5, 2020
Last year’s announcement to allow First Year Allowances (FYAs) for electric vehicle charging points was finally enacted on 16 November 2017 in Finance (No. 2) Act 2017 s38.
This means that businesses who have incurred expenditure between 23 November 2016 and 31 March 2019 (corporation tax) or 5 April 2019 (income tax) may be eligible to claim an accelerated 100% FYA in the chargeable period expenditure is incurred.
It is worth noting that expenditure on electric vehicle charging points would normally qualify for writing down allowances (WDAs) already and if the business had unutilised Annual Investment Allowances (currently £200k) would be capable of being written off in full; so, this change is expected to be only of real importance to larger businesses.
That said, because the change falls with the FYA rules for environmentally beneficial plant or machinery (P&M), a loss-making company (subject to corporation tax) may be eligible to claim a 19% first year tax credit instead of the FYA. The capital allowances tax credit rules only apply to environmentally beneficial P&M and following Autumn Budget 2017 the 19% tax credit will be reduced in 2018-19 to two thirds of the prevailing corporation tax rate (ie. 12.67%).
Whenever a business is entitled to claim FYAs, WDAs or AIAs on the same asset it can choose which one to claim. Both FYAs (including any tax credit) and AIAs must be claimed in the year expenditure is incurred (subject to pre-trading rules) whereas WDAs normally do not.
Expenditure on the provision of P&M (for example, design, transportation & on-site installation costs) and alteration of land for the purpose only of installing P&M, can often qualify for PMAs at the rate applicable to the P&M being installed. This means a business wishing to benefit from the 100% FYA should look beyond the invoice for the electric vehicle charging point itself and consider the inclusion of the other associated supplier costs (e.g., builder, engineer etc) to make the most of any benefit.
The availability of FYAs remains subject to the general exclusions contained in Capital Allowances Act s46, most notably the leasing and long-life asset exclusion.
For further details please do not hesitate to contact us.