Super-deduction replaced by “full expensing”

In his first Spring Budget speech, Chancellor Jeremy Hunt announced a new "full expensing policy" to encourage business investment.

From April 2023 to March 2026, companies can claim 100% capital allowances on qualifying plant and machinery, writing off the cost of investment in one go.

The policy comes as the existing super-deduction, which provides a 130% capital allowance on qualifying plant and machinery investments (plus a 50% first-year allowance for qualifying special rate assets), ended on 31 March 2023.

Because of the new full expensing and 50% first-year allowance, the company can claim £10 million under full expensing and £1 million under the 50% first-year allowance in the year the expenditure is incurred.

The remaining balance of £1 million can be added to the special rate pool in a subsequent accounting period.

The Chancellor said he was introducing the scheme "with an intention to make it permanent as soon as we can responsibly do so." 

Kitty Ussher, chief economist at the Institute of Directors, commented:

"Our economy has been held back in recent years because people running businesses have felt nervous of committing to investment when the climate is so uncertain.

"The introduction of 100% full expensing for the next three years is therefore very welcome, and we urge it to be continued thereafter.”

The Chancellor also announced an enhanced credit for R&D, extensions to creative industry tax reliefs, and a set of 12 new investment zones across the UK. 

In his speech on 17 March, Hunt said:

“If the super-deduction was allowed to end without a replacement, we would have fallen down the international league tables for tax competitiveness and damaged growth.

“I could not allow that to happen.

“That means that every single pound a company invests in IT equipment, plant or machinery can be deducted in full and immediately from taxable profits.”

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