Chancellor Rishi Sunak has described the super-deduction as the biggest business tax cut in modern British history for its twoyear duration. Designed to spur investment in plant and machinery, it could support your business growth. So what’s included and who qualifies?
What is it?
The government aims to encourage investment and boost productivity with this new allowance, announced in the 2021 Budget. From 1 April 2021 to 31 March 2023, companies can claim 130% capital allowances on plant and machinery investments that would usually qualify for 18% tax relief.
There is also a first-year allowance (FYA) of 50% for assets that would usually qualify for the special rate of 6% tax relief.
The super-deduction means businesses can cut taxes by up to 25p for every £1 they invest.
For example, a company investing £100,000 can claim a deduction of £130,000 against taxable profits, saving upto 19% of that – or £24,700 – on its corporation tax bill.
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Who can claim?
Companies that pay corporation tax and invest in plant or machinery on or after 1 April 2021 are eligible. Sole traders, partnerships and limited liability partnerships do not qualify.
What assets qualify?
The capital investment must be in new and unused plant and machinery and there is no expenditure limit. Assets can be funded via hire purchase but cannot be leased as ownership of asset must be demonstrated.
Eligible assets for the
super-deduction
- Cranes and diggers
- Machinery and tooling
- Computer equipment and software
- Office furniture
- Commercial vehicles such as tractors, lorries and vans (not cars).
Eligible assets for the 50% FYA
- Electrical and lighting systems
- Hot and cold-water systems
- Air-conditioning systems
- Lifts
- Solar shading.
Ineligible assets
- Second-hand or used assets
- Cars
- Buildings and structures (excluding integral features).
For more information on this allowance from HM Revenue & Customs, please refer to their website: www.gov.uk/guidance/super-deduction and we suggest you contact your Accountant to discuss your individual eligibility position.
