The Full expensing tax break for Limited Companies, which allows businesses to deduct spending on new and unused machinery and equipment from profits, was made permanent in the Autumn Statement.
Companies can write off the entire cost of investment in one go, giving rise to a tax cut of up to 25p for every £1 invested. For example, a company incurring £1.5m on new machinery can deduct the entire amount in the tax year of purchase, potentially saving £375,000 in tax if taxed at the main Corporation Tax rate of 25%.
Full expensing replaces the super-deduction, which provided a 130% tax relief but expired on the 31st March 2023. Although the super-deduction offered a higher rate of relief, the cash value of the full expensing relief is approximately the same due to the recent increase in the Corporation Tax rate to 25%.
This means that rather than claiming capital allowances and pooling expenditure, relief is provided in full as if it was an expense in the profit and loss account of a business.
Below is a list of plant and machinery that full expensing relief applies (but not limited) to:
- Machines such as computers, printers, lathes and planers
- Office equipment, such as desks and chairs
- Vehicles such as vans (commercial vehicles), lorries and tractors (but not cars and some double cab pick up trucks)
- 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 property
If the assets you want to acquire do not qualify for full expensing, then there are still other capital allowance alternatives to consider:
- Annual Investment Allowance (AIA) – this provides 100% first-year relief for plant and machinery investments up to £1 million and is available for all companies and the majority of partnerships. Also the purchasing of second-hand assets and those bought to lease to a third party can still qualify for this.
Unincorporated businesses and most partnerships can still benefit from the AIA. - 50% First Year Allowance (FYA) – The 50% first-year allowance for expenditure by companies on new special rate longer life assets until 31 March 2026. This includes assets with integral features such as solar panels, air-conditioning and heating units.
Funding qualifying purchases
If you are considering funding a qualifying purchase using asset finance then our experienced Banking & Finance team at Streets Financial Consulting Limited can assist you in obtaining a no obligation quote using their comprehensive panel of lenders.
You may also like to know that you might able to refinance existing assets to benefit your working capital. Again, Streets’ Banking & Finance team can help with this too. For further information please contact Martyn Shakespear, Head of Banking & Finance at mshakespear@streetsfc.com or Tina Hayes, Associate Director, Banking & Finance thayes@streetsfc.com.
