Finance Bill Tracking Service 2010 | Budget 2010


Who is likely to be affected?

1. Businesses that purchase new zero-emission goods vehicles.

General description of the measure

2. This measure introduces a 100 per cent first-year allowance (FYA) for business expenditure on new and unused (not second hand) zero-emission goods vehicles.

3. The Government intends to legislate this measure in a Finance Bill to be introduced as soon as possible in the next Parliament.

Operative date

4. This measure will have effect for a period of five years for expenditure incurred on new zero-emission goods vehicles on or after 1 April 2010 (corporation tax (CT)) or 6 April 2010 (income tax).

Current law and proposed revisions

5. Capital allowances allow business to deduct the costs of capital assets, such as plant and machinery, against their taxable income. They take the place of commercial depreciation, which is not allowed for tax. Since 1 April 2008 (CT) or 6 April 2008 (income tax) most businesses, regardless of size, have been able to claim an annual investment allowance (AIA) on up to £50,000 of their expenditure each year on plant or machinery (subject to certain exclusions). From 1 April 2010 (CT) or 6 April 2010 (income tax) this limit has been increased to £100,000, see Budget Note 9 for further information.

6. Any expenditure not covered by a claim to the AIA or a FYA will be dealt with in the normal capital allowances regime, entering either the main pool or special rate pool, where it will attract writing-down allowances (WDAs) at either the 20 per cent or 10 per cent rate respectively.

7. Expenditure incurred on a new (and not second hand) zero-emission goods vehicle will qualify for the new 100 per cent FYA if:

•    the vehicle cannot under any circumstances produce CO2 emissions when driven;

•    it is of a design primarily suited to the conveyance of goods or burden; and

•    the expenditure is incurred on or after 1 April 2010 (CT) or 6 April 2010 (income tax) and before 1 April 2015 (CT) or 6 April 2015 (income tax).

8. As with previous, and existing FYAs, the general exclusions in section 46 of the Capital Allowances Act 2001 will apply to the new FYA; this includes the exclusion of expenditure on assets for leasing.

9. In order to comply with State aid rules (see Commission Regulation (EC) No 800/2008, General Block Exemption Regulation) a number of additional conditions will also apply to the new FYA. In particular, the FYA will not be available to a business:

•    in difficulty for the purposes of the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02);

•    subject to an outstanding recovery order following a European Commission decision declaring an aid illegal;

•    engaged in the fisheries and aquaculture sectors, as covered by Council Regulation (EC) No 104/2000; or

•    managing waste for other undertakings for the purposes of Directive 2008/98/EC (for example, a waste collector contracting with a local authority, or large retail business, to provide an integrated waste management service).

10. To comply with State aid intensity rules, there will also be a cap that limits the amount of expenditure that will qualify for the new FYA to 85 million per undertaking over the five year life of the measure. The legislation will contain rules for determining how the cap will operate, and will take account of the undertaking's wider relationships.

Further advice

11. If you have any questions about this change, please contact Nick Williams on 020 7147 2541 (email: Information about Budget measures is available on the HM Revenue & Customs website at