Measure
Following a technical consultation with a working group, the government has announced today that it will publish draft legislation within weeks to extend the ‘full expensing’ regime (i.e. the 100% first-year allowance for main rate plant & machinery, and the 50% first-year allowance for special rate plant & machinery) to assets provided for leasing.
Companies within the charge to corporation tax which incur capital expenditure on plant and machinery assets provided for leasing. This will include equipment lessors and to some extent various property investors.
The exact timing of the measure has not yet been announced. The government plans to publish draft legislation ‘within weeks’ and will aim to implement the measure ‘when fiscal conditions allow’.
Finance Act 2024 made the full expensing regime permanent, making the UK’s capital allowances regime one of the most generous in the world. In the context of the increase in the main rate of corporation tax from 19% to 25%, capital allowances have become an increasingly valuable tool for reducing taxable profits; however, both the super-deduction and full expensing measures have to date specifically excluded expenditure on assets provided for leasing. These latest announcements will be particularly welcomed by lessors of plant and machinery, and will help to level the playing field for the tax relief available in respect of the different ways of financing business investment.