Chancellor Announces Permanent Full Expensing Allowance
The Government’s latest temporary allowance, Full Expensing, was announced in the 2023 Spring. This was for capital expenditure incurred on qualifying new plant & machinery spanning 1 April 2023 until 31 March 2026, and followed on from the super deduction allowances that ended on 31 March 2023.
As of 22 November 2023, in the Autum statement, the Chancellor announced that Full Expensing would now become a permanent allowance and continue beyond 31 March 2026. The Chancellor’s changes to capital allowances means that the UK will now have the most generous capital allowances regime in the G7 and this change alone is predicted to increase investment by 3 billion pounds a year.
The main eligibility criteria should be noted for Full Expensing, as it requires the qualifying plant and machinery to be new and is only available to UK tax paying companies or a corporate partner of a partnership that has incurred qualifying capital expenditure.
Full Expensing allows companies subject to UK corporation tax to claim up to 25% corporation tax relief on main pool plant & machinery assets. These assets will include fixtures and fittings, furnishings, certain building systems, manufacturing equipment and kit to name a few.
This lucrative allowance allows taxpayers to claim a 100% first year allowances for qualifying main pool plant & machinery expenditure in the year it was incurred with no limit of expenditure. For example, if you were to incur £1,000,000 of qualifying expenditure, this allowance could permit up to £250,000 in tax savings.
The second part to this temporary allowance is the treatment of special rate pool plant & machinery. The special rate first year allowance allows 50% of qualifying expenditure to be claimed in the year that it was incurred and then the standard 6% reducing balance from there on. This would include plant and machinery items such as building systems (lighting, power, heating etc), solar shading and lift installations.
These now permanent allowances compliment the Annual Investment Allowances which enables the first £1m of plant & machinery expenditure annually to benefit from a 100% first year allowance.
The Capital Allowances and Land Remediation Relief team at Innovation 4 Business can assist you in identifying tax reliefs available and ensure that the benefits of Full Expensing are maximised and help you to navigate the wider capital allowances.