A guide to the new capital allowance regime of unlimited full expensing
From 1 April 2023 until the end of March 2026, a new capital allowance regime of unlimited full expensing is available for companies with an immediate 100% deduction for expenditure on qualifying plant and machinery. With the corporation tax rate increase up to 25%, each pound of qualifying expenditure would save tax of 25p.
Legislation included in Finance (No. 2) Act 2023 provides for the introduction of:
Main features of these first year allowances are as follows:
As highlighted within this article on full expensing of plant and machinery, companies must watch the following exclusions when trying to claim this useful allowance or making key financial decisions that full expensing is not available on:
However, in the case of leasing, a corporate landlord with commercial rental property can claim full expensing on fixtures which are affixed to the property. Whereas any moveable assets such as furniture within a rental property would not qualify for full expensing as they fall under assets held for leasing.
Furthermore, full expensing is a first-year allowance, a claim must be made in the period in which expenditure is ‘incurred’.
In summary, with all the recent changes impacting corporation tax for companies such as associated company rules, corporation tax rate increase, abolition of super-deduction and R&D relief changes it's essential to understand what expense qualifies and what doesn't.