Use new corporation tax relief to fund new commercial fire alarm system

A new policy, that replaces the “130% super-deduction” unveiled in March 2021 has been introduced called “Full Expensing” and companies that pay corporation tax may be able to utilise this tax relief to invest in a new commercial fire alarm system.

The full expensing scheme will last from 1 April 2023 until 31 March 2026, although The Government has said that it wants to make it permanent “as soon as it can responsibly do so.”

WHAT IS FULL EXPENSING?

Under full expensing, companies can claim 100% first-year relief on qualifying new main-rate plant and machinery investments.

This means every single pound a company invests in new equipment, plant or machinery can be deducted in full and immediately from taxable profits.

HOW DOES FULL EXPENSING WORK?

Full expensing is only available under very specific circumstances.

• It is only available to companies subject to corporation tax. Sole traders and partnerships are excluded, although they are still eligible for the 100% annual investment allowance — which is capped at £1 million per year.

• Full expensing only applies to certain plant and machinery items, which refers to most capital assets — other than land, structures and buildings — used for business purposes (see below for examples).

• Plant and machinery must be new and unused to qualify for the policy. It also cannot be a car, given to the company as a gift, or purchased to lease to someone else.

• Expenditure must be within the ‘main rate pool’ of plant and machinery.

A list of items that may qualify for full expensing includes:

• Machines such as computers, printers, lathes and planers
• Office equipment such as desks and chairs
• Vehicles such as vans, lorries and tractors (but not cars)
• Warehousing equipment such as forklift trucks, pallet trucks, shelving and stackers
• Tools such as ladders and drills
• Construction equipment such as excavators, compactors, and bulldozers
• Some fixtures, such as kitchen and bathroom fittings and fire alarm systems in non-residential property.

Why should you consider replacing or installing a new fire alarm system?

Regulatory compliance

Current UK fire alarm regulations state that all business premises must have ‘an appropriate fire detection system’. That means that if there’s a fire, there needs to be a way for that fire to be easily detected and occupants can be warned easily.

Effective and efficient operation

Like most technology-based equipment, the specifications of fire alarm systems is improving all the time. So if your fire alarm is over 5-10 years old it may be worth considering a new system to take advantage of new features which are intended to make the detection of fire more effective and the operation and testing of the system more time efficient.

Leasing options

As well as benefiting from the tax relief, you might also be able to lease the system, although you may only be able to claim tax relief on these payments made in each tax year.

Leasing fire and security equipment is growing in popularity because many businesses find paying monthly for a system is more preferable than outlaying a large lump sum or having to plan ahead as technology advances and their system becomes obsolete and requires upgrading.

Next steps

Further details about Full Expensing can be found on the gov.uk website and your accountant will be able to advise you further regarding how to apply the relief.

If you’d like a quotation for a new commercial fire alarm system please get in touch.