Full Expensing

The Government has announced the making permanent of Full Expensing, a 100% FYA, which allows companies to deduct the cost of qualifying plant and machinery from their profits straight away with no expenditure limit.

Qualifying expenditure includes most plant and machinery, as long as it is unused and not second-hand, but does not include cars. Full Expensing is effective for acquisitions on or after 1 April 2023.

A 50% FYA for other plant and machinery including long life assets and integral features (known as special rate assets) operates along similar lines.

Full Expensing and the 50% FYA are only available for companies and not for unincorporated businesses.

The detail - full expensing, etc. for expenditure on plant or machinery

Expenditure is first-year qualifying expenditure if:

• it is incurred on or after 1 April 2023;
• it is incurred by a company within the charge to corporation tax;
• it is expenditure on plant or machinery which is unused and not second-hand; and
• it is not excluded by s45T CAA 2001 (exclusion of expenditure under disqualifying arrangements) or s46 CAA 2001 (general exclusions from FYA including expenditure incurred in the chargeable period in which the qualifying activity is discontinued, cars and expenditure incurred on the provision of plant or machinery for leasing).

The general leasing restriction does not prevent expenditure being first-year qualifying expenditure if the plant or machinery is provided for leasing under an excluded lease of background plant or machinery for a building.

However, if such a FYA has been made to a company, then if the sells that plant or machinery it is liable to a balancing charge. A similar rule applies where the 50% rate has been given.

Of course, all businesses also have the £1m Annual Investment Allowance available, which is generally more flexible.