How can you make the most of Full Expensing?

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As a business owner, you need to be aware of full expensing, a new Capital Allowance introduced on 1st April 2023.

What is full expensing?

Full expensing is a 100 per cent first-year allowance for companies, which will remain in place until 31 March 2026.

If you are eligible, full expensing enables you to claim a deduction equal to the full cost of qualifying expenditure on the 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.

What are the eligibility criteria?

To be eligible for this relief, 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:

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

If your business sells an asset for which you have 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 advice on Capital Allowances? Contact our team today.