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Full Expensing – How to make the most of this Capital Allowance

It is crucial to be aware of Full Expensing, a new Capital Allowance introduced on 1st April 2023, which will remain in place until 31st March 2026.

Capital Allowances provide tax relief for businesses by allowing them to deduct the cost of certain items from their profits before paying tax.

Full expensing is a 100 per cent first-year allowance for companies, enabling them to claim a deduction equal to the full cost of qualifying expenditure on main rate plant or machinery during the year the expense is incurred.

Companies can also benefit from the 50 per cent first-year allowance (FYA) for expenditure by companies on new special rate (including long life) assets until 31 March 2026

Plant and machinery encompass most tangible capital assets used in a business, excluding land, structures, and buildings.

HM Revenue & Customs (HMRC) states that the plant and machinery must “be new and unused, must not be a car, given to the company as a gift, or bought to lease to someone else”.

Examples include:

When a company sells an asset on which it has claimed full expensing or the 50 per cent first-year allowance, special disposal rules apply, involving balancing charges. These can be found here.

There are specific criteria for claiming full expensing, and unincorporated businesses are not eligible but can claim the Annual Investment Allowance (AIA) instead.

The Annual Investment Allowance (AIA) provides a 100 per cent first-year relief for plant and machinery investments up to £1 million, which is available for all businesses including unincorporated businesses and most partnerships.

Need assistance with capital allowance claims, including the new full expensing rules? Please contact us.


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