For three years from April 2023 all companies will be able to deduct 100% of qualifying plant and machinery investment immediately when calculating taxable profits for corporation tax.
Known as ‘full expensing’ the government estimates an up-front cost of around £10bn a year for each of the three years the policy is in place. The Office for Budget Responsibility said that making the full-expensing policy permanent ‘could cost approaching £10bn a year’. But according to Institute for Fiscal Studies (IFS) research in its 2023 Green Budget these figures are not a good guide to the true long-run cost of the policy. Most of the up-front cost would be recouped in future years: firms would get full expensing up front instead of a stream of capital allowances. In other words they could claim more tax relief up front but less...
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