What is Full Expensing?
The full expensing regime allows companies to write off 100% of the cost of investment in qualifying plant and machinery against taxable profits in one go. This means that companies can deduct the entire cost of a qualifying asset, such as equipment, machinery, or other property, from taxable profits in the year it is purchased, rather than writing down the cost of the asset at the standard annual rates. This means that companies paying the main rate of corporation tax obtain tax relief of 25p for every £1 of qualifying expenditure.
The Chancellor announced at the Autumn Statement on 22nd November 2023 that the Full expensing regime will not expire on 31st March 2026 as originally planned, and instead has been made permanent.
Full expensing operates alongside a 50% first-year allowance for expenditure by companies on new special rate assets (such as integral features, long-life assets, etc) that was also due to expire on 31 March 2026. The first-year allowance will also become permanent. 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.
Do I qualify for full expensing?Businesses can claim full expensing relief on all qualifying expenditures. However, it is notable that there are special capital allowance rules relating to assets acquired on hire purchase or finance leases.
What qualifies for full expensing?
- Qualifying plant and machinery must be new and unused, and 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
Any assets purchased for the purpose of leasing do not qualify.
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 firstname.lastname@example.org 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 (06/12/23). 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.