Full Expensing is a tax policy that allows companies to immediately deduct the full cost of certain investments or expenses from their taxable income in the year they are made.
This means that companies can deduct the entire cost of a qualifying asset, such as equipment, machinery, or other property, in the year it is purchased, rather than writing down the cost of the asset at the standard annual rates.
Full expensing is intended to encourage businesses to invest in new equipment, machinery, and other assets by providing an immediate tax benefit. This can help stimulate economic growth by increasing business investment and productivity.
Is full expensing replacing the super-deduction?Yes, it is – however, it is less generous than super-deduction, which was introduced as a special measure to help UK businesses recover from the pandemic. Super-deduction allowed companies to deduct 130% of the cost of capital expenses in the year they occurred and in one go. Full expensing works the same, but it is limited to only 100% of the cost of the purchased assets.
Do I qualify for full expensing?To qualify for full expensing, the expenditure on qualifying assets must be incurred between 1 April 2023 and 31 March 2026. Therefore, as a business, you must keep accurate records of your expenditure on qualifying assets, as this is what will be used to determine your eligibility for full expensing.
What qualifies for full expensing?Qualifying plant and machinery includes, but is not limited to:
- Warehousing equipment such as forklift trucks
- Tools such as ladders and drills
- Construction equipment such as bulldozers and excavators
- Machines such as computers and printers
- Vehicles such as tractors
- Lorries and vans
- Office equipment such as chairs and desks
- Some fixtures such as kitchen and bathroom fittings
- Fire alarm systems
What about assets on finance?To claim Full Expensing, a company must be the legal owner of the asset. You cannot claim Full Expensing for items you lease, so to be able to claim the allowance you must have a Hire Purchase agreement in place, be using a business loan to buy the equipment, or have purchased the item outright.
Why should I take advantage of this?If you are purchasing qualifying new main plant and machinery investments, full expensing not only provides immediate relief in the year that the purchase was made but also encourages businesses to invest in new technology and equipment, which often results in increased innovation, productivity, and competitiveness.
How do I take advantage of this?You’re eligible to take advantage of full expensing if your business is an incorporated company and it spends money on any of the qualifying plant and machinery listed in this article.
Get in touch with the team at Oldfield via info@oldfieldadvisory.com or call 02476673160 and we will be happy to advise whether Full Expensing is something you can take advantage of, based on your specific circumstances and business structure.
Please note: This article is provided for information only and was correct as at time of writing (23/06/23). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance. No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.
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