Full expensing is a headline grabber that won’t benefit the majority of owner-managed businesses
Genevieve Morris, Head of Corporate Tax said:
“Hunt’s biggest headline grabber was an introduction, from 1 April 2023, of full expensing. Companies, for a period of three years, will be allowed to ‘fully expense’ new (but not second-hand) plant and machinery expenditure, which would otherwise qualify for 18% writing down capital allowances, or expense 50% of the cost if the expenditure would have qualified for the special rate of 6%.”
In many ways, this measure offers a continuation of the Super-Deduction as it also results in 25% relief in the year of expenditure. (The Super-Deduction, which ends on 31 March 2023, gave 130% relief at the tax rate of 19%, equating to 25% relief). The Chancellor can be applauded for introducing a new uncapped relief, albeit time-limited, but can he really sell this as a tax cut for business? It certainly accelerates tax relief, but it doesn’t actually increase relief and represents a timing difference in tax relief only.
Furthermore, it accelerates relief for only the 1% of companies in the UK that have capex in excess of the annual investment allowance (AIA) of £1 million, and so will benefit only the largest businesses in capital-intensive sectors.
“The vast majority of Owner Managed Businesses will see no benefit at all but will see their Corporation Tax bill increase from April 2023.”
Would you like to know more?
If you would like to discuss any of the above issues please contact your usual Blick Rothenberg contact Genevieve Morris using the form below.
