Super Deduction: All you need to know

Super Deduction: All you need to know

In the 2021 budget announcement, businesses were told they will now benefit from two new capital allowance measures, 130% Super Deduction and 50% first-year allowance. Capital allowances take the place of accounting depreciation allowing the cost of certain capital assets to be written off against taxable income. Businesses will now be able to claim higher tax deductions on investments into qualifying plant and machinery, lowering their corporation tax bills.

What is Super Deduction?

Super-deduction offers companies the opportunity to claim 130% capital allowances on qualifying plant and machinery investments from April 2021 until the end of March 2023.

Why has Super Deduction been introduced?

Between Quarter 3 of 2019 and Quarter 3 of 2020, due to the Covid-19 pandemic, business investment fell by 11.6%, adding to existing low investment levels. To stimulate business investment and boost the UK’s post-pandemic economic recovery, the government has announced more generous capital allowances. The new super deduction rates are a strong encouragement for businesses to invest.

Are there any conditions to claiming Super Deduction?

There are a few conditions to claiming Super Deduction, these include:

– Only companies that pay corporation tax are eligible to claim Super Deduction capital allowances, therefore sole traders and partnerships are not.

– Assets must be bought brand-new; items cannot be used or second-hand or leased.

– Expenditure must be incurred by the company between 1st April 2021 and 31st March 2023.

– Contracts relating to the asset must have been entered into after 3 March 2021.

It is important to consider all the capital expenditure incentives together, to optimise the potential tax relief opportunities available. Our team of tax planning experts gets to know every aspect of your business and are proactive in identifying and planning ahead for tax relief opportunities, ensuring capital allowances are claimed at the right time.

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