Wondering how to make the most of full expensing? You can use it for new technology investments – including multifunction printers (MFPs), digital and inkjet presses and desktop devices.
Read on to learn all about full expensing, whether it’s for you, and how you can use it to your advantage when you next invest in print and document technology, whether you’re a general user of office equipment or a print service provider using bigger presses.
What is full expensing?
Full expensing is a UK tax policy that allows companies to deduct the full cost of certain investments in plant and machinery from their taxable profits before paying tax on those profits. This deduction has to be made in the year of purchase.
For example, if you bought a new printer for £10,000, you could take the entire £10,000 off your taxable profit before paying tax that year. This is an equivalent saving of 25p (by March 2024) for every £1 spent, which, in the above scenario, works out at £2,500 saved. The idea is to get companies buying equipment to grow their businesses and stimulate the economy.
The policy was first introduced in April 2023 in the Spring Budget, allowing businesses to immediately recoup a significant chunk of their investments rather than spreading the cost through depreciation over several years.
The Autumn Budget in November 2023 made the tax break permanent.
This sounds like the super-deduction?
Yes, the super-deduction aimed to support post-pandemic business recovery from 2021. While similar, it allowed companies to deduct 130% of the cost of capital expenses, not 100%.
The super-deduction policy ended on 31 March 2023 and has effectively been replaced with full expensing.
What are the benefits of full expensing?
- Reduced tax bills: Obviously, you pay less tax on capital investments of plant and machinery in the first year. The extent to which this benefits you depends on your industry – manufacturing businesses, for example, will reap particular rewards due to the number and nature of their investments. That said, full expensing could be particularly useful for commercial printers wanting to invest in new presses, such as Baltoro, iGen, Iridesse or Versant.
- Bringing forward investment: There’s an incentive to invest earlier to boost your productivity and grow your business faster (although arguably, making the policy permanent means you no longer need to rush to meet a deadline). You can take advantage of new technology more quickly, allowing you to open opportunities in emerging spaces.
- More straightforward accounts: Working out tax should be simpler because full expensing eliminates the need for complex depreciation calculations and schedules.
For the government, full expensing means:
- Accelerated economic growth: The hope is to boost economic growth by stimulating innovation, enhancing productivity, and creating jobs with investment in new equipment.
- International competitiveness: Making the UK a more attractive destination for capital investment might encourage more businesses to base themselves or expand their operations in the UK.
- Increased tax revenue: While businesses initially receive a tax deduction for their investments, the government eventually recoups the money through additional revenue generated by the increased economic activity.
Chancellor Jeremy Hunt proclaimed the change to make full expensing permanent “the largest business tax cut in modern British history”. Others were more reserved in their assessment, noting that the loss of the 2026 deadline set by the temporary measure might encourage companies to wait longer before investing.
Exactly how you see full expensing will depend on your business. Full expensing is potentially great news for you if you need to make significant machinery purchases. However, other business directors, especially in service industries, may see it as a much smaller opportunity to update office technology or invest in a new van. Others still will see full expensing as – at best – a small concession set against corporation tax, living wage rises and inflation.
But there is good news for any company that uses printers (which is still the vast majority!): printers, MFPs and digital presses all count under full expensing.
Can I use full expensing to upgrade my press or printer fleet?
Yes, provided your company and the required equipment meet the required qualifications.
- Your company must be subject to corporation tax (this rules out unincorporated businesses, but there is an alternative called the Annual Investment Allowance, which is similar).
- The machinery must be new and unused and count as ‘main rate’.*
- You cannot purchase cars, give the machinery as a gift, or buy it to lease to someone else.
- You must have a hire purchase agreement, purchase with a business loan, or buy outright. At the time of writing, you cannot use full expensing on items you lease.
- You must claim the deduction in the same year as the purchase.
*Main rate items usually include things like office hardware and fixtures (laptops, printers, desks), machinery for manufacturing and construction, and some types of commercial vehicles (not cars, in this case).
Including software under full expensing might also be possible, but navigating the rules is more complex. It’s worth discussing with your accountant – software would probably need to be something new to your company to change a process for the first time and count as a capital expense rather than an operational expenditure.
Give me some examples of what might count.
We’re not accountants, so we suggest taking further advice about the best ways to finance your next investments. However, below are three scenarios in which you might consider using full expensing:
- Your business needs a fleet of 15 new MFPs to improve productivity and bolster security. You are able to purchase them outright. You could take out a service contract separately.
- It’s time to upgrade an existing digital press. On hire purchase, you can replace with a new version or invest in a larger machine (or one with additional colours) to grow your print business.
- Your print room could be more efficient with workflow changes. You could talk to your accountant about using full expensing to invest in a technology like FreeFlow Core.
We’d love to talk to you about your options. Full expensing may or may not be the right path for you, but we can help you find your way.
Gov.uk website: full expensing