Full expensing of capital purchases

A reminder to readers that the full expensing 100% first-year capital allowance for qualifying plant and machinery assets came into effect last April. To qualify for full expensing, expenditure must be incurred on the provision of “main rate” plant or machinery. Full expensing is only available to companies subject to Corporation Tax.

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.

When the full expensing rules were first announced, the relief was set to apply until 31 March 2026. The Autumn Statement 2023 extended this deadline and announced that full expensing would be made permanent. Legislation will be introduced to remove the 2026 end date.

Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p. For “special rate” expenditure, which does not qualify for full expensing, a 50% first-year allowance (FYA) can currently be claimed 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.