Understanding First Year Allowance (FYA)

When completing a Capital Allowance claim, the First Year Allowance (FYA) stands out as an advantageous incentive for commercial property owners looking to make significant capital investments. This allowance, introduced to stimulate business investment, allows property owners to claim an accelerated rate of capital allowances on qualifying assets. Understanding and leveraging FYA can significantly enhance your overall tax position by providing immediate and significant tax relief.

What is First Year Allowances (FYA)?

First Year Allowance allows commercial property owners to claim up to 100% of the cost of qualifying assets in the year they are purchased. This immediate deduction contrasts with other capital allowances, where the costs are spread over several years. The goal of FYA is to encourage businesses to invest in specific assets by offering immediate tax relief.
Qualifying Assets for FYA

To benefit from FYA, it’s crucial to know which assets qualify. The current FYA scheme, as per HMRC guidelines, includes:

• Energy-efficient and water-saving equipment: This includes a wide range of items from energy-saving boilers and lighting to water-efficient taps and toilets.

• Electric vehicle charge points: To promote sustainable transport, businesses can claim FYA on the installation of charging points for electric vehicles.
  
• Plant and machinery for gas refuelling stations: This includes installations for Compressed Natural Gas (CNG) refuelling infrastructure, Liquefied Natural Gas (LNG) storage and dispensing systems, hydrogen refuelling stations, and biogas production and refuelling equipment.

It’s important to note that these qualifying items are subject to change, so working with Capital Allowance specialists is crucial.

The most compelling advantage of First Year Allowance (FYA) is the immediate 100% tax relief in the year the asset is purchased, significantly reducing the business’s taxable profits and resulting in lower tax bills and improved cash flow. Additionally, by focusing on energy-efficient and environmentally friendly assets, FYA not only benefits commercial properties financially but also supports broader ESG goals.

Furthermore, immediate tax relief enhances cash flow for many of our clients, especially those within the Industrial and commercial sectors, as property owners gain enhanced liquidity that can be reinvested or used to manage many other operational costs.