Overview
Commenting on today’s Autumn Statement, including a decision on the full expensing capital allowance scheme,
Sarah Gabbai, McDermott’s London-based tax lawyer, said:
“The UK Government’s initial plan in this year’s Spring Budget was to allow full expensing on initial capital investment for the next 3 years from 1 April 2023, which allows for a 100% writing down allowance for expenditure incurred on the first acquisition of certain “plant or machinery” assets used in the business, often referred to as “full expensing”. This measure was originally intended to partially offset the then anticipated increase in the rate of corporation tax from 19% to 25% with effect from 1 April this year.
The Autumn Statement has now made this temporary relief permanent – a move that is expected to cost the Treasury c. £11bn. However, it also ought to provide some much-needed certainty for capital-intensive businesses as it will encourage them to invest in capital assets on a long-term basis as and when needed for business reasons, rather than to accelerate purchase decisions merely to take advantage of a temporary relief. However, with a general election on the horizon, it is far from clear whether the next Government will commit to retaining such a measure, regardless of political persuasion.
Now that full expensing on a permanent basis is going ahead for the foreseeable future, businesses claiming the relief may well see some significant deferred tax liabilities for accounting purposes in the next year or so. While this may mean increased current tax liabilities in future periods, the new 15% domestic minimum tax, which will apply for in-scope businesses for accounting periods beginning on or after 31 December 2023, is unlikely to be triggered by this measure.”
