News & Articles


What is Full Expensing and when should farming businesses claim it?

by Christa Humphreys

Most farming businesses are structured as partnerships but those that are companies may be able to claim a new capital allowance tax relief, known as ‘Full Expensing’.

Full Expensing has been brought in to effectively replace the super- deduction which ended in March 2023. Both allowances effectively give the same rate of relief.

The key points can be summarised as follows:

  • Full Expensing is a new capital allowance which enables companies to claim 100% Corporation Tax relief in the year of expenditure on new qualifying ‘plant and machinery’.
  • Also issued alongside Full Expensing is a new 50% First Year Allowance for ‘special rate’ expenditure.
  • The new allowances can be claimed on qualifying expenditure incurred between 1 April 2023 and 31 March 2026.
  • The types of assets that qualify for Full Expensing relief include: plant and machinery (such as faming equipment); computer equipment; commercial vehicles such as lorries and tractors (but not cars); office equipment such as chairs and desks.
  • The new 50% First Year Allowance applies to special rate assets, such as integral features. These include hot and cold water systems, electrical systems and ventilation systems.
  • Several categories of assets are excluded from the new allowances, such as: assets that are ‘used’ or ‘second hand: assets the business itself will not be using in its trade but which it will be leasing out (whether within the group or otherwise); assets acquired from another group company or a ‘connected person.’
  • If the asset is sold, part or all of the relief is clawed back.
  • Alongside Full Expensing we continue to have the Annual Investment Allowance (AIA) which provides for 100% relief for expenditure on a wider scope of qualifying plant, but the main disadvantage is that an expenditure threshold of £1m pa applies, whereas there is no limit with Full Expensing relief.
  • It is not possible to claim the new allowance and the AIA on the same expenditure. However it is possible to claim AIA on part of the expenditure and the allowance on the remainder.
  • Companies with a year- end straddling 31 March 2023 may make a tax saving by deferring qualifying expenditure to the next accounting period, due to changes in the corporation tax rates.
  • The new allowances are likely to either increase a company’s deferred tax liability or reduce its deferred tax asset shown in its financial statements.
  • Companies only have two years from the end of the accounting period to make a capital allowances claim, or an adjustment to a previous claim.

A key point for farming companies will be the prioritisation of allowances claims. Generally, it is likely to be beneficial for the AIA to be claimed as a priority because it gives 100% relief rather than 50% relief (in the case of special rate expenditure) and because it doesn’t have the same clawback complications when the assets are sold on. Therefore, realistically, it is only farming companies regularly spending more than the AIA threshold of £1m per annum on plant and machinery that are likely to benefit from this new relief.

If you would like to know more about Full Expensing and how it could benefit your company, please get in touch .

This article is from the latest edition of our Agricultural Briefing. To receive future copies of any of our newsletters directly to your inbox, please visit our preference centre to register your interest.

Find out more
If you have any questions about the above, or would like more information specific to your circumstances, please enter your email address below and we will get in touch:

Our Accreditations and Memberships