Working for our membership - full expensing of capital allowances

By Mariefi Kamizouli, Head of Economics and Productivity

This is good news for the logistics industry. This regime allows companies to claim 100% capital allowances for expenditure on qualifying plant and machinery, meaning companies paying the main rate of corporation tax can obtain tax relief of 25p for every £1 of qualifying expenditure. Alongside this, the 50% first-year allowance for expenditure by companies on new special rate assets, such as integral features and long-life assets, was also made permanent. 

The primary objective of this legislation is to encourage businesses to invest more in productive assets by offering immediate tax relief, rather than spreading the deduction over several years. Logistics UK has championed the importance of full expensing of capital allowances for the industry and called for legislation to become permanent. I am pleased this has been recognised in the government’s budgetary statement. Making these reliefs permanent will provide much-needed certainty to companies. 

For logistics businesses, full expensing directly impacts financial viability and strategic planning. It can significantly reduce tax liabilities, which provides an immediate cash flow benefit, enhancing the ability of logistics companies to invest in new technologies and expand their operations. It also makes it financially more attractive for companies to make essential investments in vehicles, equipment and technology to remain competitive and efficient, as the immediate tax relief can offset a substantial portion of the initial outlay. Full expensing also supports the sector's broader goals of achieving net zero emissions and contributing to environmental sustainability as it reduces the tax burden on businesses, enabling them to invest in sustainable technologies such as electric vehicles and energy efficient equipment. 

However, there is still more to do. A point of concern for Logistics UK members is the exclusion of leasing and hiring from the full expensing regime. Many logistics companies rely heavily on leasing and hiring as a cost-effective way to manage their fleet and equipment needs. The current exclusion means these businesses cannot benefit from the same level of tax relief as those purchasing assets outright, potentially putting them at a financial disadvantage. 

In response, Logistics UK is advocating for a change in eligibility for full expensing to include leasing and hiring. This change would not only support the financial health of logistics companies but also foster a more level playing field within the industry. Additionally, it would encourage investment in newer, more environmentally friendly equipment, supporting the sector's transition to net zero operations. 

The government plans to launch a technical consultation in early 2024 on wider changes to capital allowances, aiming to address anomalies in the types of business expenditure that qualify for tax relief. The government has committed to continue exploring potential solutions for the leasing sector, acknowledging the need for a more inclusive approach, and we expect this to be part of the consultation.  

Logistics UK is actively working to represent and support its membership to reap the benefits of full expensing, and we’re keen to address changes that would have a beneficial impact on the industry. We’re exploring how expensing could be extended to support net zero objectives, such as financing vehicles and crucial infrastructure like electric vehicle charging points. We’re also keen to explore changes in eligibility rules for leasing and hiring. Equitable treatment in tax rules can significantly impact the financial strategies and operational efficiency of logistics companies. 

We are collaborating with key industry associations, such as the Finance & Leasing Association (FLA) and the British Vehicle Rental and Leasing Association (BVRLA), to amplify the voice of the logistics sector and provide a consistent voice for highlighting the sector’s needs. We will also be engaging directly with government and policymakers through consultations, submitting representations and holding discussions to highlight the importance of our industry and make the case for change. 

In order for us to influence change, we need member input to understand the specific challenges and needs, which will shape our policy position, and we’ll be asking for your input early next year. My ask of members is to actively take part in discussions and share your real-word experiences and challenges related to capital investment, leasing and hiring. This includes detailing how current policies impact your business operations and financial planning. Such first-hand accounts are instrumental in highlighting the practical implications of full expensing and related tax policies. Feedback on proposals, and any alternative proposals, are also useful. Finally, if there are any members with expertise in finance, taxation or related fields, Logistics UK seeks their technical insight to support our case for change. This input helps in formulating well-informed, technically sound responses to government consultations and to represent members and influence changes with policy makers that benefit the logistics sector. Contact me on mkamizouli@logistics.org.uk for more information. 

Published On: 21/12/2023 14:30:00

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