Time is running out to make use of the super-deduction

Businesses now have less than half a year left to make use of the opportunities available to incorporate businesses under the super-deduction capital allowance.

This Corporation Tax relief operates similarly to previous capital allowance schemes, helping companies to invest in new qualifying plant and machinery, but is perhaps more generous than any other scheme that has come before.

Available since 1 April 2021, the super-deduction and associated first-year allowance, is an excellent incentive for investment, but companies need to act quickly to take advantage of it.

Using this new measure, companies can claim a super-deduction providing an allowance of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances.

They can also use the first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances.

There is not an exhaustive list of plant and machinery assets. The kinds of assets which may qualify for either the super-deduction or the 50 per cent FYA include, but are not limited to:

  • Solar panels
  • Computer equipment and servers
  • Tractors, lorries, vans
  • Ladders, drills, cranes
  • Office chairs and desks,
  • Electric vehicle charge points
  • Refrigeration units
  • Compressors

To benefit from the relief the assets purchased must be new and not second-hand or refurbished equipment.

The relief is only available to limited companies, but unincorporated businesses can continue to benefit from the Annual Investment Allowance (AIA), which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million.

The AIA also remains available alongside the super-deduction for incorporated businesses, so businesses must review how they use these schemes to maximise the tax relief available.

Links: Super-deduction