Full Expensing

Full Expensing was introduced in April 2023 for companies as a successor to the hugely valuable 130% Super Deductions. The latter had been in place for the preceding few years, to continue the government’s strategy to encourage investment.  This was initially given a 3 year life period but has since been made permanent.

The tax relief remains significant and provides 100% full tax relief for qualifying assets in the year of expenditure and applies to main pool Plant and Machinery expenditure that is new and unused. This essentially allows businesses to fully write off new qualifying assets at their current tax rate.

As this reflects a First Year Allowance, there are the standard legislative restrictions in place including for second hand assets or those bought for leasing.  Importantly, however, there are exceptions for leases of background plant and machinery, including fixtures and other assets for building functionality, contained in SI 2007/303.

Typical anti-avoidance restrictions are in place for areas such as connected parties and special disposal rules provide for future sales proceeds, with careful consideration required along the Annual Investment Allowances regime to seek the most beneficial treatment.