As Chancellor Jeremy Hunt prepares to reveal the Autumn Statement this Wednesday, asset finance providers throughout the UK are eagerly awaiting a potentially transformative announcement on “full expensing”.
Recent data revealing the economy’s stagnation has prompted the Chancellor to consider cutting business taxes, including the extension of the full expensing capital allowance regime.
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In September, Hunt had indicated that tight fiscal constraints made tax cuts nearly impossible for the Autumn Statement. However, he shifted his stance last week, emphasising the importance of cutting business taxes at this stage.
With official figures from the Office for National Statistics indicating economic stagnation in the three months to September, there is increased pressure on Hunt to implement measures that stimulate the economy.
John Glen, Treasury chief secretary, emphasised that the Autumn Statement would prioritise boosting growth. Government insiders, the Financial Times reported, suggest that Hunt is likely to extend the full expensing regime beyond 2026, allowing businesses to deduct the entire cost of investments in IT equipment, plant, or machinery from their profits.
While a one-year extension is considered the most likely outcome, Hunt told reporters of his desire to make the tax break permanent “when fiscally responsible to do so”.
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By GlobalDataDespite economic uncertainties, the Chancellor has a unique opportunity to inject optimism into the business landscape by committing to tax exemptions for plant and machinery investments. The current policy, set to expire in 2026, provides 100% tax relief on qualifying investments, presenting an opportunity to drive growth and enhance infrastructure.
The simplicity and immediate impact of full expensing set it apart. Unlike traditional depreciation methods, it allows companies to write off the total cost in one go, streamlining financial management and directly reducing taxes.
This policy is particularly vital for businesses seeking to expand or upgrade their technological capabilities. Given Britain’s historical undercapitalisation since 1970, incentivising investments is imperative for national progress.
The scope of full expensing covers a broad range of tangible capital assets, excluding only land, structures, and buildings, offering a comprehensive solution across various industries.
The origin of the full expensing regime traces back to a budget proposal by the Finance & Leasing Association, as noted by Simon Goldie of the FLA in a Leasing Life Webinar preceding Wednesday’s Autumn Statement.
“We recommended the Government do it, we were delighted they did, not so delighted that they didn’t include leasing,” he said. However, the government did commit to exploring “solutions” for developing the regime including how to include leasing, something the FLA has been doing with Treasury officials, along with other trade bodies, since the Spring budget in mid-March, when full expensing was adopted.
Full expensing was a top consideration for Nathan Mollett, head of asset finance at United Trust Bank, another participant in the Leasing Life Webinar.
Concerns about the potential inflationary impacts of business tax cuts are addressed by Goldie, who argues that encouraging businesses to invest and plan will likely drive up productivity, especially with the inclusion of leasing, and should not be inflationary.
All of this should encourage UK lessors to feel upbeat about Wednesday because, if Chancellor Jeremy Hunt commits to extending or making permanent the “full expensing” regime, it signifies not only a substantial boon for businesses but also a recognition of the pivotal role leasing plays in the economic landscape.
