Capital Allowances –
Permanent full expensing from 2026-2027
This previously announced measure has been made permanent from 1 April 2026.
- Full expensing allows companies to claim an unlimited 100% first-year allowance for expenditure on new equipment falling into the main pool;
- Companies investing in special rate assets (such as integral fixtures and fittings) can claim an unlimited 50% first-year allowance in the year of investment;
- Full expensing only applies to companies and excludes plant and machinery purchased for leasing purposes, cars and second hand assets, ie all equipment must be brand new; and
- Companies will still be able to claim the 100% Annual Investment Allowance against second hand and special rate assets.
This means that it is vitally important to take advice from the M+A team where large capital expenditure is planned.
Research and Development
Under tax simplification reforms, the existing Research and Development Expenditure (RDEC) and SME schemes are to be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 to be claimed in the new merged scheme.
The notional tax rate applied to loss-makers under the merged scheme will be at a rate of 19%, compared to a rate of 25% under the current RDEC scheme.
New measures will also apply to amend the R&D intensive scheme that was announced at Spring Budget 2023.
- Under the scheme, a company is considered R&D intensive where its qualifying R&D expenditure is worth 40% or more of its total expenditure.
- For these purposes, expenditure is calculated from the profit and loss, adjusted for amounts not deductible for corporation tax.
- The expenditure threshold will be reduced from 40% to 30% for accounting periods beginning on or after 1 April 2024.
- A loss-making SME company with qualifying R&D expenditure of 30% or more of its total expenditure will be able to claim the intensive scheme relief for any period beginning from 1 April 2024.
A one year grace period will also be introduced, enabling a company which has previously claimed successfully under the scheme, but which fails to meet the intensity threshold, to continue to claim for the following period provided the other conditions for the relief are met.
Research and Development tax credit payments
From 1 April 2024, R&D claimants will no longer be able to nominate a third-party payee for R&D tax credit payments, other than in limited circumstances. Furthermore, no new assignments of R&D tax credit repayments will be possible from 22 November 2023.
As payments of R&D tax reliefs will be paid directly to the company making the R&D claim, these new measures will ensure that the claimant company will receive payment more quickly.
HMRC perceive there to be high levels of non-compliance in the R&D relief regime and will be publishing a compliance action plan in due course to reduce the number of spurious claims.
Enterprise Investment Scheme (EIS) and
Venture Capital Trust (VCT) extension
The government will legislate in the Autumn Finance Bill 2023 to extend the existing sunset clauses for the EIS and VCT from 6 April 2025 to 6 April 2035.
The sunset clause, which was created as part of European Union state aid rules, means that EIS and VCT relief is currently only available to subscribers for shares issued before 6 April 2025.
Enterprise Management Incentives (EMI)
Legislation will be introduced to modify the current EMI reporting requirements to extend the time limit to submit a notification of EMI options from 92 days following grant, to 6 July following the tax year in which the option was granted.
A consequential amendment will be made to provide that the 12 month enquiry window will run from 6 July following the end of the tax year in which the option was granted.
These amendments will apply to options granted on or after 6 April 2024.
