Capital Allowances Act 2001 section 262A

First-year tax credits

Section 262A provides the mechanism by which companies that cannot fully use their first-year allowances (because they have insufficient taxable profits) can instead claim a payable tax credit from HMRC.

• Companies that have a first-year allowance entitlement but cannot use it fully against their taxable income may surrender the unused portion in exchange for a first-year tax credit.
• The tax credit is a cash payment from HMRC, making it particularly valuable for loss-making companies or those with low profits who would otherwise derive no immediate benefit from capital allowances.
• The credit applies specifically to qualifying expenditure that attracts first-year allowances, such as expenditure on energy-saving or environmentally beneficial plant and machinery.
• The detailed rules governing the amount of the credit, the surrender process, and the conditions that must be met are set out in Part 2A of the Capital Allowances Act 2001.

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