100% Full Expensing made permanent

Announcement

Today, Wednesday 22 November 2023, saw the Chancellor (Jeremy Hunt MP) announce that 100% Full Expensing would be made permanent through his Autumn Statement - having introduced this as a temporary measure for three years until 30 March 2026 earlier this year.

This is a measure showing this Government's intention to support businesses and encourage growth in an economy that is recovering from extraordinary circumstances over the previous three years and in-part still ongoing.

This means that companies investing in UK assets will be able to reduce their tax liabilities by up to 25p for every £1 of expenditure on plant and machinery.

The announcement itself was not a total surprise given the Chancellor's commentary from his March 2023 Budget, that the measure would be made permanent as and when the Exchequer could afford it - estimated today as £11bn per annum.

Full Expensing Snapshot

 -  100% first-year allowance (FYA), allowing companies (subject to Corporation Tax) to claim the deduction from taxable profits of 100% of their main pool plant and machinery qualifying expenditure in the year expenditure is incurred.

 -  50% rate for special rate pool plant and machinery (integral features, added insulation & long life assets).

 -  Only available on plant and machinery which is unused and not second-hand.

 -  Anti-avoidance measures in place including expenditure incurred under “disqualifying arrangements” and a “special balancing charge” upon disposals for claimed assets. 

 -  General exclusions for first-year qualifying expenditure at s.46 Capital Allowances Act 2001 – caveat allowing background plant and machinery to qualify i.e. investment landlords.

Commentary

As we have discussed previously, Full Expensing will really only affect the heaviest UK Corporation Tax paying capital investors across the country, as it is expected that 99% of UK businesses will have their investments completely recovered within the AIA cap (now £1,000,000) in the year of expenditure, without the need for Full Expensing.  It is important to note that Full Expensing is not available to Income Tax payers and so many businesses operating as individuals or partnerships such as farms and doctors surgeries will not benefit from these accelerate tax savings.

Alun Oliver – “The Chancellor announced over 100 new growth measures and some further consultations to improve the operation of different aspects of the economy – particularly extending the 100% capital allowances from ‘Full Expensing’ within finance leasing sector. There is a lot to digest but we will endeavour to clarify and expand on these announcements over the coming days and weeks as the details are published and set out how we can support you in optimising your property tax position in light of the Autumn Statement.”

Next Steps

If you would like to discuss Full Expensing or any other capital allowances issues, then please do contact the team on 0345 230 6450 or hello@e3consulting.co.uk with any queries or for assistance. We look forward to speaking with you soon.