Capital Allowances Act 2001 section 38B

General exclusions applying to section 38A

Section 38B sets out the circumstances in which expenditure that would otherwise qualify for the annual investment allowance (AIA) is excluded from that relief.

• Expenditure incurred in the final period of a qualifying activity (i.e. when the trade or business permanently ceases) cannot qualify for the AIA.
• Expenditure on cars is excluded, as is expenditure wholly for the purposes of an oil and gas ring fence trade subject to the supplementary charge under corporation tax rules.
• Where plant or machinery is acquired in connection with a change in a third party's trade or business, and obtaining the AIA is a main benefit of that change, the expenditure is excluded — this is an anti-avoidance measure.
• Expenditure on plant or machinery that was originally provided for non-qualifying purposes, for long funding leasing, or received as a gift is also excluded from the AIA, subject to a limited exception for pre-trading mineral exploration expenditure.