This lets taxpayers deduct 100% of the cost of certain plant and machinery from their profits before tax. It is effective from 1 April 2023 to 31 March 2026.
It applies to spending on main rate equipment, which includes but is not limited to, warehousing equipment such as forklift trucks, tools such as ladders and drills, construction equipment such as bulldozers and excavators, machines such as computers and printers, vehicles such as tractors, lorries and vans, office equipment such as chairs and desks, and some fixtures such as kitchen and bathroom fittings and fire alarm systems.
FE means that companies can deduct 100% of the cost from their profits straight away – rather than more slowly over the life of the asset.
Similar to the super-deduction, FE also results in a 25p tax saving for every £1 invested (19% x 130% super-deduction rate = 25%).
Before the super-deduction and with the 19% Corporation Tax rate, companies investing £10 million in main rate assets received a £342,000 tax saving in year 1. Under full expensing, on a £10 million investment, a company will receive a £2.5 million tax saving in year 1.
As part of his commitment to maintain a stable economy, the Chancellor’s long-term ambition is to make full expensing permanent.