Autumn Statement 2023 makes Full Expensing Permanent
During the Autumn statement on 22nd November, a significant change was announced with the decision to make Full Expensing a permanent fixture, a shift from its initially scheduled end on 31st March 2026.
What is Full Expensing?
Full Expensing is a tax incentive that allows companies to claim a remarkable 100% capital allowance on qualifying plant and machinery investments. This is a notable deviation from the Annual Investment Allowance (AIA), which, in contrast, imposes a cap at £1 million. The implications extend beyond just financial relief, promising to save corporations varying percentages in terms of their taxable income, ranging between 19% to 25%.
Qualifying Factors and Conditions
This generous tax relief is applicable to purchases of qualifying plant and machinery starting from 1 April 2023. It’s important to note that this benefit is exclusively available to companies subject to Corporation Tax. Unfortunately, unincorporated businesses, such as sole traders and partnerships, do not have access to Full Expensing. Instead, they can leverage the AIA of £1 million to achieve 100% capital allowances.
What is included?
Plant and Machinery that qualifies includes:
Main Rate: The plant and machinery must be new and unused and does not include cars. The plant and machinery cannot be given to the company as a gift or bought to lease to someone else. Various items included are:
- Machines (computers, printers, lathes and planers etc.)
- Office equipment (desks and chairs etc.)
- Vehicles (vans, lorries, and tractors etc.)
- Tools (ladders, drills etc.)
- Warehousing equipment (forklift trucks, pallet trucks, shelving etc.)
- Certain fixtures (kitchen and bathroom fittings and fire alarm systems in commercial property etc.)
Secondhand Assets: While Full Expensing is predominantly applicable to new and unused assets, excluding cars, there’s still room for relief. Expenditure on second-hand assets or those acquired for leasing purposes can qualify for the AIA.
First Year Allowance for Special Rate Assets
A notable feature of Full Expensing is the introduction of a 50% first-year allowance for special rate assets. This is a substantial enhancement compared to the previously available 6% writing down allowance. This opens up avenues for businesses to significantly accelerate their capital allowances on eligible assets.
For businesses contemplating investments in plant and machinery and seeking clarity on their eligibility for Full Expensing, please contact Paul.Jackson@langricks.com who can provide tailored advice, ensuring that you maximise the benefits of this permanent tax incentive. Embracing Full Expensing could prove to be a strategic financial move, bringing long-term advantages to your business.