New 100% First-Year Capital Allowance for UK Businesses

Good news for UK businesses! A new "full expensing" measure has been introduced, which will provide a 100% first-year capital allowance for qualifying plant and machinery assets. This move is expected to encourage companies to invest in their businesses and drive growth, which is essential for the UK economy to bounce back from the challenges of the pandemic.

What Qualifies for Full Expensing?

To qualify for full expensing, companies must have incurred expenditure on the provision of "main rate" plant or machinery. This includes a wide range of assets such as:

• computers,
• printers,
• vehicles,
• warehousing equipment,
• tools,
• construction equipment,
• some fixtures such as kitchen and bathroom fittings and fire alarm systems in non-residential properties.

It's important to note that full expensing is only available to companies subject to Corporation Tax. The new measure will apply from 1 April 2023 until 31 March 2026, but it may be extended in the future.

Replacing the Super-Deduction

The super-deduction introduced during the pandemic ended on 31 March 2023 and is now replaced by full expensing. Under full expensing, for every pound a company invests, their taxes will be cut by up to 25p. This significant tax incentive is expected to encourage companies to invest in their businesses and drive growth.

Special Rate Expenditure

For "special rate" expenditure that doesn't qualify for full expensing, companies can claim a 50% first-year allowance (FYA) instead. The 50% FYA was also due to end on 31 March 2023, but it has been extended by three years until 31 March 2026.

Annual Investment Allowance (AIA)

Businesses can also continue to use the Annual Investment Allowance (AIA) to claim a 100% tax deduction on qualifying expenditures on plant and machinery of up to £1m per year. This includes unincorporated businesses and most partnerships.

Promoting Innovation and Growth

The full expensing capital allowance scheme is an excellent opportunity for UK businesses to invest in their futures, take advantage of tax incentives, and drive growth. While the economy is still recovering from the pandemic, it's essential to encourage businesses to invest, create employment opportunities and stimulate economic growth.

The measure is also expected to promote innovation, as companies will have more funds available to invest in new technologies and equipment essential to stay competitive in a technology-driven business world. This will help businesses become more productive and competitive, providing long-term economic benefits.

If you would like more advice and assistance with full expensing, please contact us at info@gkaccountingservices.com or call us on 01269 518 815, where we will be more than happy to answer any of your questions.