Part 2

Plant and machinery allowances
Chapter 4

First-year qualifying expenditure

Types of expenditure which may qualify for first-year allowances

Exclusions from allowances under section 45K
45M
1
Expenditure incurred by a person is not first-year qualifying expenditure under section 45K if it is within subsection (2), (4),
(7) or (7A)
.
2
Expenditure is within this subsection if, at the time a claim is made under section 3 for a section 45K allowance in respect of the expenditure, the person who incurred the expenditure is, or forms part of, an undertaking within subsection (3).
3
An undertaking is within this subsection if one or both of the following conditions are met—
a
it is reasonable to assume that the undertaking would be regarded as
an undertaking in difficulty for the purposes of the General Block Exemption Regulation
;
b
the undertaking is subject to an outstanding recovery order made by virtue of Article 108(2) of the Treaty on the Functioning of the European Union (Commission Decision declaring aid illegal and incompatible with the common market).
4
Expenditure is within this subsection if it is incurred for the purposes of a qualifying activity—
a
in the fishery or aquaculture sector, as covered by
Regulation (
EU
) No 1379/2013 of the European Parliament and of the Council
,
b
in the coal sector, steel sector, shipbuilding sector or synthetic fibres sector,
ba
in the transport sector or related infrastructure,
bb
relating to energy generation, distribution or infrastructure,
bc
relating to the development of broadband networks,
c
relating to the management of waste of undertakings, or
d
relating to—
i
the primary production of agricultural products,
ii
on-farm activities necessary for preparing an animal or plant product for the first sale, or
iii
the first sale of agricultural products by a primary producer to wholesalers, retailers or processors, in circumstances where that sale does not take place on separate premises reserved for that purpose.
4A
Expressions used in subsection (4)(b), (ba), (bb) or (bc) and in the General Block Exemption Regulation have the same meaning as in that Regulation.
5
In subsection (4)(c) the reference to waste of undertakings does not include waste of the person who incurred the expenditure or of any other person forming part of the same undertaking as that person.
6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7
Expenditure is within this subsection if a relevant grant or relevant payment is made towards—
a
that expenditure, or
b
any other expenditure which is incurred by any person in respect of the same designated assisted area, and on the same single investment project, as that expenditure.
7A
Expenditure is within this subsection if—
a
the area by reference to which the condition in section 45K(1)(a) is met is not an area which falls within Article 107(3)(a) of the Treaty on the Functioning of the European Union,
b
the condition in section 45K(8)(a) is not met in relation to the expenditure, and
c
at the time the expenditure is incurred the company is not an
SME
for the purposes of the General Block Exemption Regulation.
8
A section 45K allowance made in respect of first-year qualifying expenditure is to be withdrawn if—
a
after it is made, a relevant grant or relevant payment is made towards that expenditure, or
b
within the period of 3 years beginning when that expenditure was incurred, a relevant grant or relevant payment is made towards any other expenditure which is incurred by any person in respect of the same designated assisted area, and on the same single investment project, as that expenditure.
9
All such assessments and adjustments of assessments are to be made as are necessary to give effect to subsection (8).
10
If a person who has made a return becomes aware that, after making it, anything in it has become incorrect because of the operation of this section, that person must give notice to an officer of Revenue and Customs specifying how the return needs to be amended.
11
The notice must be given within 3 months beginning with the day on which the person first became aware that anything in the return had become incorrect because of the operation of this section.
12
In this section—
- “
agricultural product
”,
has
the same meaning as in the General Block Exemption Regulation;
- “
General Block Exemption Regulation
” means Commission Regulation
(
EU
) No 651/2014
(General block exemption Regulation)
as it had effect in the United Kingdom immediately before IP completion day
;
- “management” and “waste” have the meaning given by Article 1 of Directive
2006/12/EC
of the European Parliament and of the Council;
- “
relevant grant or relevant payment
” means a grant or payment which is—
  1. a State aid, other than an allowance under this Part, or
  2. a grant or subsidy, other than a State aid, which the Treasury by order declares to be relevant for the purposes of the witholding of a section 45K allowance;
- “
section 45K allowance
” means a first-year allowance in respect of expenditure that is first-year qualifying expenditure under section 45K;
- “
single investment project
” has the same meaning as in the General Block Exemption Regulation;
- “
undertaking
” means—
  1. an autonomous enterprise, or
  2. an enterprise (not within paragraph (a)) and its partner enterprises (if any) and its linked enterprises (if any),
and for this purpose “enterprise”, “autonomous enterprise”, “partner enterprises” and “linked enterprises” have the meaning given by Annex 1 to the General Block Exemption Regulation.
13
Nothing in this section limits references to “State aid” to State aid which is required to be notified to and approved by the European Commission.
14
For the purposes of this section references to expenditure incurred in respect of a designated assisted area includes expenditure incurred on the provision of things for use primarily in that area or on services to be provided primarily in that area.
15
The Treasury may by order make such provision amending this section as appears to them appropriate for the purpose of giving effect to any future amendments of or instruments replacing—
a
the General Block Exemption Regulation,
b
the Community Guidelines on State Aid for Rescuing and Restructuring Firms in Difficulty (2004/C 244/02),
c
Regulation (
EU
) No 1379/2013 of the European Parliament and of the Council,
d
Directive
2006/12/EC
of the European Parliament and of the Council, or
e
the Treaty on the Functioning of the European Union.
Pt. 2 modified (24.2.2003) by Proceeds of Crime Act 2002 (c. 29), s. 458(1), Sch. 10 para. 12 (with Sch. 10 para. 17(1)); S.I. 2003/120, art. 2, Sch. (with arts. 3 4) (as amended (20.2.2003) by S.I. 2003/333, art. 14)
S. 45H(2) modified (with effect in accordance with s. 167 of the amending Act) by Finance Act 2003 (c. 14) , Sch. 30 para. 7
Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 4 para. 4 ; S.I. 2004/2575 , art. 2(1) , Sch. 1
Pt. 2 modified (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 9(2), 21(2) (with s. 38(2)); S.I. 2004/2575, art. 2(1) , Sch. 1
Pt. 2 restricted (5.10.2004) by Energy Act 2004 (c. 20) , s. 198(2) , Sch. 9 paras. 10, 22 (with s. 38(2) ); S.I. 2004/2575 , art. 2(1) , Sch. 1
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 19
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 para. 35
Pt. 2 modified (22.7.2008) by Crossrail Act 2008 (c. 18), Sch. 13 paras. 36, 37
Pt. 2 modified (21.7.2009) by Finance Act 2009 (c. 10), s. 24
Ss. 45K-45N inserted (with effect in accordance with Sch. 11 para. 8 of the amending Act) by Finance Act 2012 (c. 14), Sch. 11 para. 3
Pt. 2 modified (17.7.2013) by Finance Act 2013 (c. 29), s. 73(7)-(11) (with s. 73(6))
S. 45M(4A) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(5)
S. 45M(7A) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(7)
Words in s. 45M(1) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(2)
Words in s. 45M(3)(a) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(3)
Words in s. 45M(4)(a) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(4)(a)
Ss. 45M(4)(ba)-(bc) inserted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(4)(b)
S. 45M(6) omitted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 13 para. 4(6)
Word in s. 45M(12) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(8)(a)
Words in s. 45M(12) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(8)(b)
S. 45M(15)(c) substituted (with effect in accordance with Sch. 13 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 13 para. 4(9)
Words in s. 45M(12) inserted (31.12.2020) by The Taxes (State Aid) (Amendments) (EU Exit) Regulations 2020 (S.I. 2020/1499), regs. 1, 3(3)
Pt. 2 modified (10.6.2021) by Finance Act 2021 (c. 26), s. 9(1)(a)