1. Full Expensing (FE) and 50% First Year Allowance (FYA)
With the expiration of the super-deduction in March 2023, the Chancellor announced two new capital allowance measures from 1 April 2023 to 31 March 2026.
Full Expensing (FE) allows companies (excluding sole traders or partnerships) to deduct 100% of the cost of certain new plant and machinery from profits before tax. It applies to spending on main pool rate equipment such as furniture, fittings, sanitary equipment, and fire alarms.
The 50% First Year Allowance (FYA) applies to other new plant and machinery known as special rate assets, including electrical and mechanical installations.
2. Structures and Buildings Allowance (SBA)
The SBA offers tax relief on the construction cost of non-residential structures. It is claimable over 33 and one third years (3% per annum) and applies to contracts signed on or after 29 Oct 2018.
3. Plant and machinery – Writing Down Allowances
Main pool is written down on a reducing balance basis at 18% per annum.
The special rate pool (integral features) is written down on a reducing balance basis at 6% per annum (previously 8%).
There is an opportunity to claim for certain integral features if the expenditure on the property was incurred post 31 March 2008, and the seller claimed all available allowances before April 2008.
Investment Zones - 12 new zones will be created with similar incentives to the designated freeports. There are First Year Allowances of 100% for plant and machinery, and an enhanced SBA of 10%.
4. Annual Investment Allowance (AIA)
The increased AIA of £1M was due to end on 31 March 2023 but will now continue at that level as the planned reduction back to £200,000 per annum has been scrapped. Qualifying plant and machinery is 100% allowable in the first year.
5. Tax incentives for development of brownfield land
Land Remediation Tax Relief (LRR) offers a tax deduction of 150% of qualifying expenditure.
Land Remediation Relief includes expenditure on the treatment and removal of Japanese knotweed (excluding removal to a landfill site) and expenditure on long-term derelict land.
There is a first-year tax credit for companies that surrender a loss created as a result of land remediation. (Credit equal to 16% of the loss surrendered).
Contacts
If you require assistance in relation to the above and/or would like to discuss anything further, please do not hesitate to contact info@act.london or your usual A.C.T. contact.