April 25, 2024


Where farming companies are looking to invest heavily in capital items, there is an additional tax relief now available. Known as ‘full expensing’ (“FE”), it gives 100% allowances against the cost of all new and unused qualifying plant and equipment, or 50% where the purchase relates to a special rate pool item (broadly, integral features such as lighting and electrical installations, or long-life assets).

While FE was set to expire on 31 March 2026, the Government announced in the 2023 Autumn Statement that this, together with first year allowances, would be made permanent.

All businesses, including partnerships and sole trades, can take advantage of the Annual Investment Allowance (“AIA”), giving 100%relief on total expenditure up to £1 million. This can be used for both new and second-hand items and includes special rate items such as solar panels and integral features.

FE can be claimed in addition to the AIA, and where expenditure is incurred on special rate items, a 50% allowance can be claimed. As special rate items do qualify for the AIA, the 50% rate is only beneficial if the total expenditure exceeds £1 million.

If a tax adjusted loss arises, this can be carried forward to offset against future profits or carried back 12 months to obtain a refund of corporation tax paid in an earlier year.

When a company subsequently disposes of an asset on which the allowances have been claimed, a balancing charge must be made equivalent to the sale proceeds. Where 50% relief was claimed, a charge of 50% of the disposal proceeds arises with the balance being deducted from the capital allowance pool. As such, a record must be kept of each separate item on which the allowances are claimed.

HMRC’s recent guidance confirms that mixed partnerships may also be able to take advantage of FE – see Tom’s article next looking at this specific area.


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