It is crucial to be aware of “Full Expensing”, a new Capital Allowance introduced from 1st April 2023, which will remain in place until 31st March 2026.

Capital Allowances provide tax relief for businesses by allowing them to deduct the cost of certain items from their profits before paying tax.

Full expensing is a 100 per cent first-year allowance for companies, enabling them to claim a deduction equal to the full cost of qualifying expenditure on main rate plant or machinery during the year the expense is incurred.

Companies can also benefit from the 50 per cent first-year allowance (FYA) for expenditure on new special rate (including long life) assets until 31 March 2026.

Plant and machinery encompasses most tangible capital assets used in a business, excluding land, structures, and buildings.

HM Revenue & Customs (HMRC) states that the plant and machinery must “be new and unused, must not be a car, not given to the company as a gift, nor purchased in order to lease to someone else”.

Examples include:

  • Machines such as computers, printers, lathes and planers
  • Office equipment such as desks and chairs
  • Vehicles such as vans, lorries and tractors (but not cars)
  • Warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
  • Tools such as ladders and drills
  • Construction equipment such as excavators, compactors, and bulldozers
  • Some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential properties.

When a company sells an asset on which it has claimed full expensing or the 50 per cent first-year allowance, special disposal rules apply, involving balancing charges. These can be found here.

There are specific criteria for claiming full expensing.

Unincorporated businesses are not eligible but can claim the Annual Investment Allowance (AIA) instead, which provides a 100 per cent first-year relief for plant and machinery investments up to £1 million, which is available for all businesses including unincorporated businesses and most partnerships.

If you need advice on full expensing or any of the other allowances mentioned, please contact your Seymour Taylor representative today or email or call 01494 552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 26 April 2023.


Posted in Blog news.