50% First Year Allowance

One of several key Construction & Property Incentives announcements in the 2021 UK Budget was the 50% First Year Allowance (FYA). Like the super deduction, the FYA is a temporary enhanced Capital Allowances relief for expenditure incurred on qualifying assets from 1 April 2021 to 31 March 2023.

While the super deduction applies to expenditure that qualifies for main pool relief only, with the FYA, expenditure that qualifies for special rate pool relief can be deducted at 50% in the first year and reverts to 6% for the following years.

As well as building integral features of power, lighting, heating, and ventilation equipment, any expenditure classed as a long-life asset can also benefit from the 50% FYA.

A comparison of a standard 6% special rate pool deduction over a ten-year period versus the 50% FYA is set out below:

Numbers are for illustrative purposes only.

How we can help

Our specialist Construction & Property Incentives team can support you in identifying qualifying expenditure and maximising the various reliefs available. For example, another Capital Allowances relief is the Annual Investment Allowance (AIA), which allows businesses 100% tax relief on qualifying plant and machinery. With the AIA set at £1m until 31 December 2021, there are opportunities for special rate pool expenditure to be treated as a 100% FYA.