Meaning of “new and unused” clarified for CAs purposes

The guidance on what “new and unused” means for the purposes of first-year allowances has been updated in order to make things clearer. What’s the full story?

HMRC’s guidance has been updated to make the capital allowances rules on qualifying expenditure for first-year allowances (FYAs) clearer.

The 100% FYA for main rate expenditure (full expensing) and the 50% FYA for special rate expenditure can only be used if the plant and machinery is new and unused. The guidance has now been updated to clarify that: 

• where expenditure is incurred on upgrading or improving an existing asset by adding new parts, the expenditure may qualify for full expensing/the 50% FYA
• where new and unused parts are combined with used or second-hand parts to create a new asset, only the expenditure incurred on the new and unused parts may qualify for full expensing/the 50% FYA; and
• where something new has been made from recycled materials, the new asset will be unused and not second hand for the purposes of full expensing/the 50% FYA.

It may be prudent to revisit expenditure from previous years to check whether FYAs should have been claimed.