Full Expensing: What is it and how does work?
Posted on 21st March 2023 at 10:01
The Spring Budget 2023 has introduced a new capital allowance term to us called Full Expensing. You may be asking what it is and how it will work so we thought we’d explain it and the other capital allowances available.
What is Full Expensing?
Full Expensing is a capital allowance offer that can provide 100% first-year relief on new plant and machinery investments. This new allowance will be introduced on 1 April 2023 and ends on 31 March 2026.
This is a welcomed relief for businesses as the Super Deduction Scheme ends on 31 March 2023 and corporation tax is increasing for many on 1 April 2023.
This allowance enables businesses to write off the cost of investment in one go and for every £1 invested they will reduce their taxes by 25p.
How does Full Expensing work?
There are some rules that you must meet to be eligible for Full Expensing, these are:
The expenditure must occur between 1 April 2023 and 31 March 2026 and incur on the provision of the “main rate” plant or machinery.
It is available to companies that are subject to Corporate Tax only. Unincorporated companies can’t claim but are eligible for the Annual Investment Allowance (see below).
Plant and machinery must be new not used, a gift or bought to be leased to a third party. Used and leased assets may be eligible under the Annual Investment Allowance.
What qualifies for Full Expensing?
Most capital assets excluding land and buildings are considered as plant and machinery in the context of capital allowances. Those that qualify for Full Expensing include:
Machines
Office equipment and furniture
Vehicles excluding cars
Tools
Construction equipment
Some fixtures in non-residential properties such as kitchen and bathroom fittings
What other capital allowances are available?
The Annual Investment Allowance (AIA) was permanently fixed at £1 million in Autumn rather than being reduced as planned. This provides 100% first-year relief for plant and machinery investments up to £1 million.
The first-year allowance (FYA) is available for 50% of expenditure on new special rate assets which includes long-life assets. This is another new capital allowance, and it is available until 31 March 2026. It sits alongside Full Expensing and is available on expenditure that doesn’t qualify for Full Expensing.
Funding capital expenditure
If you want to take advantage of these generous capital allowances but don’t have the cash to make these purchases and need support accessing funding, please get in touch as we can help you to access funds.
Claiming capital allowances
If you are unsure which allowances you should be using or need assistance managing capital allowances, get in touch and we will help guide you through them.
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