Following the planned rate increase in corporation tax, which will come into action from April 2023, larger organisations may have decided to hold off on making any plant or machinery investments. In doing this, businesses can achieve a tax relief of 25% on the costs of their investment.

However, instead of opting to wait, the Government will be advising companies to invest sooner. To encourage this, they will be offering a super deduction of 130% of capital expenditure, which can be used on all new qualifying plant and machinery.

How To Take Advantage Of The Super Deduction

In order to take advantage of the super deduction, the company must be entered into the buying contract on or after the 4th of March 2021. The final purchase must also have been completed between the 1st of April 2021 and the 31st of March 2023. It is important to note that the 130% deduction will only apply to assets that fall within the main capital allowances pool, with writing down allowances usually given at 18%.

Vehicles do not qualify for the super deduction unless they have been purchased and adapted for use within a driving school. Other new assets such as fixtures and integral features in buildings will only qualify for a 50% deduction in the year of purchase, providing that they were acquired before the 1st of April 2023. The remaining cost of these assets will qualify for writing down allowance at 6% per year.

The new deductions for the cost of new assets will be applied alongside the 100% deduction, which is available under the annual investment allowance. This covers up to £1 million of yearly expenditure until the 31st of December 2021. If you require support to determine the best timing of expenditure to maximise the reliefs available, please do not hesitate to get in touch.