Capital Allowances Super-Deduction

In the March 2021 Budget the government announced the super-deduction for capital allowances.

The super-deduction offers 130% first-year relief on qualifying main rate plant and machinery investments until 31 March 2023 for companies.

The relief equates to a reduction in tax of 25p for every £1 spent, for example:

If you spend £10,000 on qualifying machinery you get a tax deduction as follows:

• £10,000 x 130% = £13,000
• Tax at 19% = £2,470
• % deduction is £2,470/£10,000 = 24.7%

Assets that qualify for the super-deduction must be NEW, second-hand items do not qualify, and they include:

• Machinery
• Computer equipment and servers
• Tractors, lorries and vans
• Office chairs and desks
• Electric vehicle charge points

It is important to note that when the assets on which super-deduction is claimed are sold, they are subject to a balancing charge based on 130% of the disposal proceeds if they are sold before 1 April 2023.

Furthermore, there is a 50% first year allowance for special rate assets until 31 March 2023 for companies. Special rate assets include integral features such as:

• Wiring
• Lighting
• Heating

The Annual Investment Allowance is £1,000,000 until 1 January 2022 when this will reduce to £200,000.

If you have any questions in relation to super-deductions tax relief please do not hesitate to contact us.