Full Expensing: The 100% First-Year Allowance for Property Development Companies

A development company buys a new telehandler, a fleet of vans, or a set of site cabins, and can deduct the entire cost against profits in the year of purchase — no cap, no waiting. That is full expensing, and most property companies either haven’t heard of it or assume it is the same as the Annual Investment Allowance. It isn’t, and the difference matters most on the day you sell the asset.

What full expensing actually gives you

Since 1 April 2023, a company within the charge to Corporation Tax can deduct 100% of the cost of qualifying new and unused main-rate plant and machinery in the accounting period it is bought, with no upper limit. The relief was due to be temporary; it was made permanent at the Autumn Statement later that year. There is no £1 million ceiling as there is with the Annual Investment Allowance (AIA) — a company spending £4 million on plant in a single year can, in principle, deduct all of it in that year.

Unlike most capital allowances, full expensing is a company-only relief. It sits in Corporation Tax legislation and is not available to sole traders, ordinary partnerships or LLPs, all of whom continue to rely on the AIA for equivalent 100% relief up to the cap.

What qualifies — and what doesn’t

The asset has to be new and unused main-rate plant and machinery bought for use in the company’s trade. For a property development company that typically covers site plant such as excavators, dumpers and generators, scaffolding and access equipment owned rather than hired, site cabins and welfare units, tools, computers and office IT, and commercial vehicles such as vans (cars are excluded).

Three exclusions catch people out regularly:

• Second-hand assets don’t qualify. Buying a used digger from another developer, or acquiring plant as part of a business purchase, falls outside full expensing entirely — it goes into the ordinary pool at the standard 18% writing-down rate instead.
• Assets bought for leasing out are excluded, with narrow exceptions. A company that buys plant to hire to other contractors, rather than to use itself, generally cannot claim full expensing on it.
• Cars are excluded under all the first-year allowance regimes, though fully electric cars can separately qualify for a 100% first-year allowance of their own — a different relief with its own rules.

The special rate pool: 50%, not 100%

Not everything gets the full 100%. Assets that would otherwise sit in the special rate pool — integral features such as electrical systems, heating and cooling, lifts, and other long-life assets — qualify for a 50% first-year allowance under the equivalent regime, with the remaining 50% added to the special rate pool and written down at 6% a year from then on. This is the pool that a lot of fit-out spend in a commercial refurbishment falls into, so it is worth checking which rate actually applies before assuming a project qualifies in full. For how fixtures in a building purchase are treated more broadly, see our guide to capital allowances on commercial property.

The disposal trap nobody mentions

This is the part that catches out companies that treat full expensing as a free lunch. Ordinary pooled assets — whether relieved through the AIA or standard writing-down allowances — sit in a pool with a running written-down value. When you sell one, the sale proceeds are simply deducted from the pool, and you are only taxed on a balancing charge if the pool runs negative.

Full-expensed assets are not pooled in the same way. Because the whole cost was already relieved in year one, the asset has no written-down value left to net against. HMRC’s rule is that on disposal, you bring in a balancing charge equal to the full disposal proceeds, taxed as income in the period of sale — not just the gain over cost, the entire sale price. Sell a telehandler bought for £80,000 three years ago for £45,000, and £45,000 becomes taxable profit in that year, on top of whatever the asset actually made you while you owned it.

For plant a development company genuinely intends to keep for the life of the business, that rarely matters in practice — the relief was real and the eventual scrap value is small. For plant bought for a single project and sold on afterwards, which is common in development where equipment gets bought, used hard for eighteen months, and moved on, the clawback can undo a meaningful slice of the up-front benefit. Modelling the expected resale value before claiming, not after, is the difference between a genuine acceleration of relief and a bill that turns up two or three years later than expected.

Full expensing vs the Annual Investment Allowance

Most property companies spending under £1 million a year on qualifying plant have a genuine choice between the two reliefs for main-rate assets, and the two behave differently in ways beyond the headline rate:

• Pooling. AIA-relieved assets are still pooled, so disposal proceeds are netted off rather than taxed in full — the disposal trap above is far less severe under AIA.
• The cap. AIA is capped at £1 million a year, and that cap is shared across a group of companies under common control. Full expensing has no cap and no group-sharing rule — each company claims on its own spend.
• Unincorporated businesses. A property trading partnership or sole trader only has AIA available; full expensing simply doesn’t apply outside a company.

A common approach for a group running several development SPVs is to use the AIA cap first, particularly on special rate pool assets where the disposal treatment is gentler, and reserve full expensing for higher-value main-rate plant once the AIA cap is used up, or for plant genuinely intended to be kept for the long term. Within a designated Freeport or Investment Zone tax site, an even more generous uncapped 100% first-year allowance applies on top of these rules — see our guide to Freeport and Investment Zone tax reliefs for where the North West’s designated sites are and how the two interact.

Where this matters most for a property development company

The companies that benefit most from full expensing are those buying and holding plant across multiple projects — a developer building a permanent fleet of vans and site equipment used project after project, rather than hired in and returned. For that pattern, the 100% deduction is close to free money: the assets aren’t being sold for years, if ever, so the disposal clawback is a distant, small concern relative to the immediate cash flow benefit of not paying Corporation Tax on profit that has been reinvested in the business.

The companies that need to think harder are single-project SPVs buying plant for one scheme with a view to selling it on completion. There, the timing of the deduction and the timing of the eventual balancing charge both land inside a short window, and the net benefit can be much smaller than the headline 100% suggests once resale value is factored in.

Common mistakes

• Assuming full expensing covers the building or the fit-out generally, rather than the specific plant and machinery within it
• Claiming full expensing on second-hand plant bought from a supplier or another developer, where it simply isn’t available
• Not modelling the disposal balancing charge before selling a fully expensed asset, and being surprised by the tax bill
• Missing the special rate pool distinction and assuming every asset qualifies for 100% rather than 50%
• Buying plant personally rather than through the company to try to access the relief — full expensing is only available to companies, so this doesn’t work

Getting the claim right

Full expensing is claimed through the Corporation Tax return, and the underlying asset register needs to be good enough to identify exactly which assets were fully expensed, when, and at what cost — that record is what makes the eventual disposal calculation straightforward rather than a scramble. For a group running several SPVs with plant moving between projects, getting the allocation and record-keeping right at the point of purchase saves a much harder reconstruction exercise later. This is exactly the kind of structuring question worth raising under our Property Advisory service before the next piece of equipment is ordered.

Common questions

What is full expensing and which companies can claim it?

Full expensing is a 100% first-year deduction against Corporation Tax for money a company spends on new and unused main-rate plant and machinery, with no upper limit. It has been available since 1 April 2023 and was made permanent from the Autumn Statement later that year. Only companies within the charge to Corporation Tax can claim it — sole traders, partnerships and LLPs cannot, and must rely on the Annual Investment Allowance instead.

Does full expensing apply to the building itself?

No. Full expensing is for plant and machinery — equipment, vehicles, tools and moveable assets a company owns and uses in its trade. The structure and shell of a building is relieved separately through the Structures and Buildings Allowance at a flat 3% a year, and integral features such as electrical and heating systems sit in the special rate pool, where full expensing gives only a 50% first-year allowance rather than 100%.

What happens when I sell an asset I've fully expensed?

You bring in a balancing charge equal to the full disposal proceeds, taxed as income in the period of sale, because the asset was never pooled and has no written-down value to offset against the sale price. This is different from the Annual Investment Allowance, where disposal proceeds are deducted from the general pool and usually only create an immediate charge if the pool is emptied.

Can sole traders or property partnerships claim full expensing?

No. Full expensing is restricted to companies within the charge to Corporation Tax. Sole traders, ordinary partnerships and LLPs claim the Annual Investment Allowance instead, which gives 100% relief up to an annual cap rather than an uncapped deduction.

This article is general information, not personal tax advice, and tax rules change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.

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