The chancellor’s big announcement on Corporation Tax in his 2023 Autumn Statement was not actually anything new at all, but the extension of the ‘Full Expensing’ first-year allowance, which gives companies 100% relief for qualifying main rate capital expenditure, and 50% for expenditure on special rate assets.
The relief was due to end in April 2026 but now has been made permanent, which means it stays until the chancellor – either this one or a new one – decides to change it.
Under Full Expensing, expenditure on a new machine, for instance, will typically qualify for 100% relief regardless of cost, resulting in a year-one tax saving equating to 25% of the cost of the asset.
While its headline rate isn’t as generous as its predecessor, the Super Deduction scheme, it does still represent a very significant saving. While this sounds great, it is worth bearing in mind that for the majority of small & medium-sized businesses, it doesn’t result in any additional tax savings.
This is because there is already 100% relief per year on £1 million of qualifying capital expenditure under the Annual Investment Allowance which was made permanent by the Chancellor in his Spring 2023 budget. So, this new announcement will only help companies and groups which already spend over £1 million per year on qualifying capital expenditure.
What the permanent extension of the Full Expensing capital allowances relief will do is provide a future tax saving for the largest companies who spend over £1 million each year. As the largest businesses plan capital expenditure several years ahead this will provide extra certainty that they can continue to benefit from this relief and receive a 25% tax saving on expenditure well into the future.
Though with an election only a little over a year away at the latest providing some uncertainty to weigh against the certainty of this now ‘permanent’ relief, it is unclear how much this new decision will impact the capital expenditure plans of large companies.
While its headline rate isn’t as generous as its predecessor, the Super Deduction scheme, it does still represent a very significant saving.
While this sounds great, it is worth bearing in mind that for the majority of small & medium-sized businesses, it doesn’t result in any additional tax savings.
For further guidance
For further guidance on any of the tax measures discussed in this article, please contact your usual MHA advisor or Contact Us.
Read the latest Autumn Statement 2023 commentary – visit our dedicated hub where we will be providing resources, advice and practical guidance on what the new tax measures could mean for you and your business, to help you prepare for and manage their impact.
