Autumn Statement 2023: plant and machinery ‘full expensing’ to be made permanent

The announcement, intended to boost investment and growth, was made as part of chancellor Jeremy Hunt’s autumn statement. The scheme was previously set to end on 31 March 2026. Full expensing – a 100% first year allowance – is available on most plant and machinery. A 50% first year allowance is available for certain ‘long-life’ capital assets. There is no cap on the amount of the amount of expenditure that can qualify for relief.

Tax expert Eloise Walker of Pinsent Masons said that the announcement would be welcomed by businesses across the UK.

“Companies can only be happy to see a permanent 100% capital expenditure deduction – so this a good news story for business,” she said. “This will be particularly welcome for businesses considering making significant capital investments - or may encourage businesses to make such investments.”

“Decisions about future investments are often made some time – even years – before expenditure that would benefit from the tax relief is actually incurred. This is because other hurdles often need to be overcome before the capital investment can be made. For example, land which will house the new plant and machinery may need to be developed, or planning permissions may need to be obtained - all of which can take a significant amount of time. There was concern that the temporary nature of ‘full expensing’ had limited benefit for businesses who had not yet committed to making capital investments, since by the time they were ready to invest, the relief would have been withdrawn. Making the relief permanent creates stability and certainty, which will hopefully encourage increased UK capital investment,” she said.

The chancellor also announced a consultation on the capital allowances regime, with the aim of introducing broader changes to simplify the current system. The consultation will be limited to reviewing capital allowances available for expenditure on plant and machinery and will not consider other capital allowances, such as structures and buildings allowances. The consultation will also not propose changing existing capital allowances rates. The government will hold meetings with stakeholders from January 2024 with a view to publishing draft legislation in summer 2024.

Tax relief on capital expenditure is currently provided in the form of capital allowances. ‘Writing-down allowances’ (WDAs) are available on certain expenditure on plant and machinery. The main WDA is 18%, whilst investments in ‘special rate’ assets normally only qualify for allowances at 6%. Special rate assets include long life assets and integral features in buildings such as lifts and air conditioning.

The chancellor also announced the extension of tax benefits for freeports and investment zones. Freeport tax reliefs in England will now end on 30 September 2031. For freeports in Scotland and Wales, the reliefs will be extended from 5 to 10 years subject to agreement with the devolved administrations. For investment zones, tax reliefs will be extended from 5 to 10 years. Special tax sites within the investment zones and freeports benefit from a package of enhanced tax reliefs including stamp duty land tax (SDLT) relief, enhanced 100% capital allowances for plant and machinery, enhanced structures and buildings allowances of 10% on non-residential buildings and relief from employers’ National Insurance contributions.