Autumn Statement 2023: The extension of full expensing for capital allowances 

In essence, this announcement is simply the government making good on what was promised back in the Spring Budget where full expensing was introduced to replace the super-deduction scheme. It applied from 1 April 2023, and was due to expire on 31 March 2026, but the latest announcement has extended it indefinitely (for now). Making it permanent gives companies certainty to go ahead and spend. 

How does this fit in with wider allowances? 

The capital allowance regime allows businesses to write off the cost of certain capital expenditure against their taxable profits, thus reducing their overall tax bills.  

The measures which have now been extended will allow for a full First Year Allowance (FYA) as follows: 

• 100% FYA (so a full tax deduction for expenditure in the year of expenditure) on plant and machinery that does not fall within the rules for special rate expenditure. Expenditure qualifying for 100% FYA includes for example, computer equipment, chairs and desks, security and telecommunication systems, fire alarms, vans and lorries, and manufacturing equipment.  
• 50% FYA on special pool expenditure which includes spending on heating, air conditioning, ventilation, hot and cold-water systems, lifts, electrical systems, solar panels and long-life assets. 

 Please note it does not apply to expenditure on cars, buildings or on plant and machinery that it is to be leased.   

 However, there are some restrictions that business owners should be aware of: 

• The relief is restricted to companies although unincorporated businesses can still claim 100% Annual Investment allowance (‘AIA’) on their qualifying expenditure up to £1 million a year.  
• The relief cannot be claimed in the period that the qualifying activity is permanently discontinued. 
• The asset purchased must be a new asset as the relief does not apply to the acquisition of second-hand assets.  
• The relief similarly does not apply to gifted assets.  

 There is currently a consultation as to whether the relief should be extended to genuine equipment leasing businesses. 

 Furthermore, once the asset on which the relief has been claimed is sold there will be a taxable balancing charge equal to either 100% or 50% of the disposal value depending on the percentage FYA claimed.  

 The news that FYA has been extended indefinitely is of course, welcome. However, any new government could still change or abolish the relief.  

 Contact us 

If you would like to discuss FYA and how it affects you, please do not hesitate to contact us.