Guidance

Autumn Statement 2023 – Permanent full expensing – technical consultation

Updated 30 January 2024

HMT-HMRC Permanent full expensing technical consultation

1. Objective

At Spring Budget 2023, the government announced full expensing from 1 April 2023 to 31 March 2026. At Autumn Statement 2023, the government announced that full expensing would be made permanent.

We are legislating in Finance Bill 2023-24 to remove the 2026 end date for full expensing, in order to provide maximum certainty to businesses and enable long-term investment decisions to be made.

We will also launch a technical consultation on wider changes to the capital allowances legislation, as the introduction of permanent full expensing provides us with an opportunity to deliver on the government’s longer-term ambition to simplify the tax system.

2. Scope

HM Treasury and HMRC will undertake industry engagement with stakeholders to determine whether broader changes could be made to simplify the existing capital allowances legislation, principally the Capital Allowances Act 2001. Over the years, this legislation has built heavily upon its core regime of general writing-down allowances and more targeted first-year allowances. There remains a sustained role for writing-down allowances, given that:

• historic expenditure will remain pooled - some expenditure does not qualify for first-year allowances

• the balance of expenditure for the 50% first-year allowance for special rate expenditure is added to the pool to allow writing down allowances to be claimed

• claiming the full expensing first-year allowances will not always be right for every business, and there may be reasons why a company chooses not to claim.

The principles for this consultation on the legislative implications of permanent full expensing are as follows:

• Introducing permanent full expensing provides an opportunity to consider simplifying, condensing or reducing broader capital allowances legislation.

• The consultation will focus on changes to capital allowances available for expenditure on the provision of plant and machinery and is not intended to consider reforms to other capital allowances such as structures and buildings allowances, and research and development allowances.

• The consultation is not intended to extend the scope of expenditure that is eligible for capital allowances, or for specific capital allowances such as the policy design of full expensing (100% or 50% first-year allowances).

• The permanent rates of capital allowances have been confirmed by the Chancellor in Autumn Statement 2023. We are not proposing changes to the rates of the Annual Investment Allowance, full expensing, first-year allowances and writing down allowances currently available.

• Whilst HM Treasury and HMRC are open to receiving evidence from businesses on their experience of the tax system, substantive reform of capital allowances policy and other policy levers outside them are not being considered as part of this process.

• HM Treasury and HMRC will work with industry and tax professionals throughout this process in an attempt to minimise any potential unintended consequences that could arise when changing the legislation and to ensure the policy intent is delivered.

• The capital allowances system must remain robust so any changes to the legislation must also not increase the risks of error and fraud.

3. Approach

The government will hold working group meetings with interested stakeholders throughout 2024 and seek to publish draft legislation in 2024.

The industry engagement and technical consultation will help to inform the advice provided to HM Treasury ministers. The final decisions on adjustments to the capital allowances legislation are for the Chancellor of the Exchequer to make.

4. Participant guidelines

The working group is intended to provide an open forum for discussion between the government and interested stakeholders across business and the tax professional community. These discussions may include draft proposals. These proposals, as well as comments by HMT or HMRC officials, do not represent official government policy.  

The detailed contents of any discussions should not be shared with individuals outside the working group. Attendees may wish to keep key stakeholders or association members informed of developments and may seek views from them to inform the working group discussions. Updates should be shared on a need-to-know basis only, and it should be made clear that the contents of these discussions are not a statement of official government policy, and decisions regarding any changes remain a decision for the Chancellor.

5. Points of contact

If you would like to receive more information about this technical consultation or have questions throughout the consultation process, please get in touch with [email protected].