Image source, Getty Images
By Michael Race
Business reporter, BBC News
A tax break which allows businesses to deduct the full cost of investing in machinery and equipment from their tax bill has been made permanent.
Chancellor Jeremy Hunt announced the policy in his Autumn Statement, calling it the "largest business tax cut in modern British history".
The move comes after calls from some business groups to extend the policy, which had been due to end in 2026.
It aims to encourage firms to invest and in turn lead to economic growth.
Mr Hunt said the policy - known as "full-expensing" - would mean that for every million pounds a company invests, it would get £250,000 off their tax bill in the same year.
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He claimed big business groups and bosses from the likes of BT, Siemens and Bosch had said making the policy permanent would be the "single most transformational thing I could do for business investment and growth".
Mr Hunt said the move would cost £11bn per year. Labour has also supported the move.
According to research by the British Chambers of Commerce, the policy has benefitted 34% of businesses since it was temporarily put in place in April.
The UK's official economic forecaster, the Office for Budget Responsibility (OBR), has forecast that the UK's economy will grow more slowly than previously thought over the next two years due to inflation - the rate prices are increasing - taking longer to fall.
Businesses are also having to pay a higher rate of corporation tax, which rose to 25% from 19% in April. Corporation tax is charged on a company's profits - the amount of money firms make, minus their costs - and is paid to the government by UK businesses and foreign companies with UK offices.
Under the full-expensing policy first created in April, companies can deduct the costs of various equipment from their tax bills, including:
Rain Newton-Smith, chief executive of the CBI business lobby group, said the tax break would help firms to "unleash pent-up investment", which she argued was "critical to getting momentum into the economy".
Neil Carberry, chief executive of the Recruitment and Employment Confederation industry body, said making full expensing permanent was good news, but only for businesses "in the sectors that can really benefit from it".
"Services firms - the bulk of the economy - benefit far less."
Robert Forrester, boss of one of Britain's biggest car dealerships, Vertu Motors, said he did not think making the move was a "massive thing for most businesses".
"For many British businesses, they're just trying to keep going," he told the BBC's Today programme prior to the Autumn Statement.
"They're not investing heavily in plants and machinery, but they're still very valid businesses that employ people and serve customers."
As well as the expenses tax break, the chancellor also extended the 75% discount on business rates up to £110,000 for retail, hospitality and leisure businesses for another year, along with freezing business rates for the smallest companies.
Tina McKenzie, policy chair at the Federation of Small Businesses (FSB), said business rates were "one of the absolute worst taxes faced by small firms", adding that the chancellor was right to have concentrated on "helping the smallest firms at the heart of so many communities".