Home 5 Corporation Tax 5 Claim full expensing or 50% FYA

Claim full expensing or 50% FYA

4 July 2024

Full expensing offers a 100% first-year capital allowance for qualifying plant and machinery assets, reducing taxes for companies subject to Corporation Tax. If ineligible, a 50% first-year allowance may apply. The Annual Investment Allowance also provides a 100% tax deduction.

Full expensing, which came into effect last April, provides a 100% first-year capital allowance for qualifying plant and machinery assets. To qualify, a company must incur expenditure on the provision of “main rate” plant or machinery.

Only companies subject to Corporation Tax can avail of full expensing.

Qualifying plant and machinery may include, but are not limited to:

  • 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; and
  • Some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential property.

With full expensing, a company can cut their taxes by up to 25p for every pound they invest. If the expenditure is at a “special rate” and does not qualify for full expensing, a company can claim a 50% first-year allowance (FYA) instead.

Businesses, including unincorporated businesses and most partnerships, can continue to use the Annual Investment Allowance (AIA) to claim a 100% tax deduction on qualifying expenditure on plant and machinery of up to £1m per year.

Source: HM Government Tue, 02 Jul 2024 00:00:00 +0100

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