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Full expensing of capital purchases

18 January 2024

Corporation Tax-paying companies can benefit from the full expensing 100% first-year capital allowance on qualifying plant and machinery assets, reducing taxes by up to 25p for every pound invested. The Autumn Statement 2023 made this measure permanent.

Readers, note that the full expensing 100% first-year capital allowance for qualifying plant and machinery assets took effect last April. Companies subject to Corporation Tax can qualify for full expensing by incurring expenditure on the provision of “main rate” plant or machinery.

Plant and machinery that may qualify for full expensing includes (but is 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.

The Autumn Statement 2023 extended the deadline and declared full expensing, initially set until 31 March 2026, as permanent. Legislation will remove the 2026 end date.

Under full expensing, companies can cut their taxes by up to 25p for every pound invested. For “special rate” expenditure not qualifying for full expensing, they can currently claim a 50% first-year allowance (FYA) instead.

Businesses can also 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. This includes unincorporated businesses and most partnerships.

Source: HM Treasury Tue, 16 Jan 2024 00:00:00 +0100

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