Full Expensing Explained
During the 2023 Spring Budget, the Chancellor introduced a new tax relief measure called "full expensing", which allows companies to claim an unlimited 100% first-year allowance on qualifying investments made in new plant and machinery from the 1st April 2023 to 31 March 2026, replacing the previous super-deduction scheme. Essentially, for every pound a company invests, they can get up to 25p in tax cuts. This measure is designed to make the UK's capital allowances system among the best in the world.
Additionally, for plant and machinery that falls under the "special rate" category, a 50% first-year allowance will be applicable during the same period.
‘Full Expensing’ enables companies to deduct the entire amount of their investment in new assets, such as machinery and equipment, from their taxable profits immediately, rather than spreading out the deduction over several years. This immediate deduction will reduce your company's tax liability in the near term, potentially, increasing the amount of capital available for re-investment back into your business.
What qualifies for ‘Full Expensing’
- Plant & Machinery such as Cranes and Diggers
- IT Equipment
- Commercial Vehicles such as tractors, lorries and vans (not cars)
- Forklift Trucks
- Construction equipment
- Fire Alarm equipment
- Kitchen & Bathroom fit outs in non-residential properties
What qualifies for ‘50% FYA’
- Electrical and lighting systems
- Hot and cold-water systems
- Air-conditioning systems
- Lifts
- Solar shading
Only limited companies are eligible for full expensing however, unincorporated businesses investing in plant and machinery can still take advantage of the Annual Investment Allowance. This provides a 100% deduction on qualifying expenditure up to £1 million.
What are the benefits for my business of ‘Full Expensing’
- The scheme is intended to encourage companies to invest in new equipment and technology by reducing the upfront cost of investment.
- Investing in new equipment and technology will enable your business to increase productivity and efficiency, generating higher output and increased competitiveness.
- "Full Expensing" is designed to encourage innovation by providing companies with the financial resources to invest in new ideas and technologies, leading to the development of new products and services.
For more information on this allowance from HM Revenue & Customs, please refer to their website: www.gov.uk/government/publications/full-expensing and we suggest you contact your accountant to discuss your individual eligibility position.
If we haven’t answered your questions on the ‘Full Expensing’ scheme, or you’d like to find out more, please speak to one of the team on 01202 434000 or get in touch below.
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