Following the end of the ‘Super Deduction Tax’, the UK Government has introduced the Full Expensing Tax Break, which is available to businesses from April 2023.
Following the Autumn Statement 2023, it was announced that full expensing will now be made permanent in order to provide maximum certainty to businesses and enable long-term investment decisions to be made.
If you’re a UK business and have been considering upgrading your commercial refrigeration to True, there has never been a better time to do so.
This tax break is designed to encourage business investment by allowing companies subject to corporation tax to claim 100% capital allowances on qualifying plant and machinery investments. This means that businesses can now deduct the entire cost of their investment immediately.
What is the ‘Full Expensing Tax Break’?
Instead of spreading the cost of an asset over several years, the ‘Full Expensing Tax Break’ allows you to deduct the entire cost of a qualified asset, such as a refrigerator, in the same year it was purchased.
This is a significant advantage because it reduces taxable income for that year, which in turn lowers your tax bill and frees up capital that you can reinvest in your business.
What is included?
To be able to benefit from the Full Expensing Tax Break, it’s crucial you understand what falls under the category of ‘plant and machinery’.
Although most tangible capital assets, other than land and structures/buildings, are considered plant and machinery (for the purposes of claiming capital allowances), here’s a short breakdown of what qualifies:
- Commercial refrigeration units
- Office equipment, such as chairs and desks
- Tools, including ladders and drills
- Vehicles, such as tractors, lorries and vans (but not cars)
- Computer printers, equipment and servers
How full expensing works
For full expensing to apply, the plant and machinery must be brand new and not previously used.
This scheme is also only available to companies that pay Corporation Tax, which in turn allows your business to benefit from 100% first-year relief from 1st April 2023.
If you’re a smaller business that is organised differently (like a sole trader or partnership), you can’t use full expensing, but you might qualify for something similar called the Annual Investment Allowance (AIA), which we discuss below.
If you’re unsure whether you’re eligible to claim, you can check by visiting the Gov.UK website.
Alternative capital allowances in the UK
In addition to Full Expensing, there are other valuable capital allowance options available to businesses in the UK. These are particularly relevant for those who are not eligible for full expensing.
These allowances are:
- Annual Investment Allowance (AIA) – Allows businesses to claim 100% of the cost of plant and machinery up to £1m in the year it is incurred.
- Writing Down Allowances (WDA) – Spread the tax deductions over time at 18% and 6% a year for main rate and special rate expenditure, respectively.
- First-year allowances (FYA) – Permits a company to claim a percentage of the cost of plant and machinery investments in the year they are incurred.
Exploring capital allowances in the EU
If you’re based out of the UK, there are a few other grants or schemes that you could benefit from.
Croatia
In Croatia, business owners can receive a non-refundable grant covering up to 20% of eligible costs for purchasing high-tech plants and machinery. There are incentives available both for micro-entrepreneurs and small, medium-sized and large enterprises.
For more information and to check your eligibility, please visit the Croatian government website here: https://investcroatia.gov.hr/en/incentive-measures-for-investment-projects/
Netherlands
The Energie-investeringsaftrek (EIA) allows those in the Netherlands to pay less tax when investing in energy-efficient technology and sustainable energy.
To qualify, businesses must be located in the Netherlands, Aruba, Curacao, Sint Maarten, or the BES Islands, and pay income tax or company tax. The scheme aims to enhance financial returns by lowering energy bills and offering an average tax reduction of 11%.
Eligible investments, listed in the Energy List 2023, can result in a 45.5% tax deduction from the taxable profit on top of regular depreciation. Applications must be submitted digitally within three months of commission approval. If an investment is not on the Energy List, alternative reporting options are available.
To read more, click here: https://english.rvo.nl/subsidies-financing/eia/entrepreneurs#more-information
Switzerland
As a Swiss business owner, you may be eligible for an additional tax deduction of up to 50% on your expenditures related to research and development (R&D), depending on the canton (region) in which your business operates.
For more information on the availability and specific rules regarding this deduction, it’s advisable to consult with a tax advisor or local authorities to understand the exact regulations and eligibility criteria. For more information, visit the following website: https://www.efd.admin.ch/efd/en/home/taxes/national-taxation/the-swiss-tax-system.html
TopTen.ch also offers a funding programme for “Energy-efficient commercial appliances” to support you in saving energy and money. You can receive subsidies of up to 30% of the purchase price, valid from 1st September 2022 (invoice date) to the end of 2023. We are unsure if this programme will be replaced by a new programme, similarly to the UK.
For more information on this programme, visit here: https://www.topten.ch/business/page/foerderprogramm-gewerbegeraete
Value in upgrading your refrigeration equipment to True
Outside of saving on corporation tax, there are plenty of other reasons you should upgrade your commercial refrigeration with True.
1. Improved energy efficiency
Ageing units tend to be less energy-efficient, which can significantly inflate your electricity bills, especially as energy costs fluctuate.
When you invest in refrigeration equipment, it’s not just about the upfront purchase price, you should also consider the long-term operating costs.
To help, we’ve created an energy cost calculator that provides an estimate of the potential lifetime electricity (kilowatt-hours) savings when choosing True products over others on the market.
2. Embracing sustainability
Beyond saving on running costs from upgrading to newer units, you can also play your part in preserving the environment.
As more and more consumers increasingly value eco-conscious choices, showcasing your business’s commitment to environmental responsibility can be a significant advantage.
At True, we don’t just develop refrigeration products, but the way in which we manufacture and operate our facilities is with a goal to limit and offset our negative impact on the planet.
We have also launched our Beyond Ready initiative, which outlines how we can help you achieve your long-term business goals, while respecting the environment.
To visit our Beyond Ready hub, please click this link: https://truerefrigeration.ch/beyond-ready/
3. Reduced repair costs with a longer warranty
When something goes wrong, every second of downtime costs your business. Older commercial refrigeration units, which are more prone to issues, can disrupt your operations and escalate costs, this is where a reliable warranty becomes invaluable.
At True, as a standard, we provide a five year parts and labour warranty, so you’ll have confidence that if something goes wrong, it’ll be fixed, and you won’t have to pay out.
4. Not just meeting, but exceeding legislation
Choosing a new True refrigeration product means having confidence that you’re future-proofing your business.
At True, we exceed legislation and performance standards with our commercial refrigeration. Our range includes uprights and glass doors, all of which are registered with the EPREL (European Product Database for Energy Labelling). EPREL is an EU Government-led source for verifying that products (including commercial refrigeration) comply with Minimum Energy Performance Standards.
While there is currently no UK equivalent database, we recommend customers check the EPREL to confirm that the products they are considering for purchase meet all current legislation.
Importance of choosing True
As business costs continue to rise, taking advantage of this tax reduction will not only help you to upgrade your refrigeration products, but also offset other increasing expenditure.
If you have questions about True’s energy efficiency, get in touch with a member of our team today, or visit our website to see our full range of commercial refrigeration for your business.
To determine if your company is eligible to benefit from this saving and upgrade your commercial refrigeration, visit the Gov.UK website today.
