Super-deduction Capital Allowance
A reminder about the Super-deduction capital allowance. The super-deduction will allow companies to reduce their corporation tax bill.
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets are able to claim:
- A 130% super-deduction capital allowance on qualifying plant and machinery
- A 50% first-year allowance (FYA) for qualifying special rate assets
In general, assets that qualify for the main capital allowances pool will be able to claim the super-deduction. Cars, second hand assets and machinery acquired by hire businesses, would not qualify.
This super-deduction capital allowance is not available to individuals, partnerships or LLPS.
What is plant and machinery?
Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances.
The kinds of assets which may qualify for either the super-deduction or the 50% FYA include:
- Computer equipment and servers
- Tractors, lorries, vans
- Ladders, drills, cranes
- Office chairs and desks,
- Electric vehicle charge points
- Refrigeration units
- Compressors
These are examples rather than an exhaustive list.
What does this all mean?
For a company that claims the super-deduction the profit of the company will be reduced by 130% of the value of the asset.
This is compared to a claim for an annual investment allowance which reduces the profit by 100% of the value of the assets.
The rate of the main pool is currently 18%.
Source: HMTreasury.
Why do I want to know this?
As a company purchasing a new asset then knowing you could actually reduce your tax bill just by claiming for the correct deduction is certainly good to know!
When bearing in mind the criteria (including the dates of when the super-deduction covers and what it covers) this could be a useful factor when deciding when to purchase a new piece of machinery and what that item may be.
Just say you purchase a new item in April 2023, rather than a few weeks earlier then that could have a direct impact on the amount of corporation tax you pay.
How can we help?
Give us a call so that we can understand you and your business. We offer a no obligation meeting with a senior team member to be able to talk you through how we may be able to support you.
Shaw Austin are a firm of Chartered Accountants based in Chester supporting independent business throughout the UK. We take the headache out of business accounting and taxation by providing our clients with a personal service.
This article includes tax rates and allowances correct on date of publishing – tax rates and allowances can change from year to year. This is a general article to assist readers. Professional advice should always be taken in respect of your personal circumstances.
Published May 2022
