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130% Super-Deduction Scheme: How Does Work?

Posted: 9th Aug 2021 by Clair Watmore Business Advice General, Taxation

The super-deduction £25bn tax break, announced earlier in the year by the Government, is intended to spur investment by providing 25p off company tax bills for every pound of qualifying spending on plant and machinery.

What is it?

Companies purchasing new and unused qualifying plant and machinery now qualify for a Super Deduction of 130% of the purchase cost in the year in which you buy it.

Saving 25p for every £1 spent on your investment.

Conditions

Expenditure must be incurred between 1 April 2021 – end of March 2023

You must be trading through a limited company. Sole traders and partnerships do not qualify.

Majority of plant and machinery used in business will qualify. Notable exceptions are cars, items integral to buildings and structural costs. However, items integral to buildings will qualify for an alternative allowance.

Unlike usual Annual Investment Allowance, there is no limit on the amount of expenditure you can claim the Super Deduction on.

Points to consider

There may be a clawback of some of the Super Deduction in the form of a Balancing charge when the asset is sold. From April 2024 the Balancing Charge will be equal to sale proceeds received.

If the asset is sold before the end of March 2024 the Balancing Charge will be up to 130% of the sale proceeds received.

Annual Investment Allowance

The £1 million Annual investment allowance has been extended to up to 31st December 2021.

Sole trader, partnerships and limited companies qualify for the increased allowance.

Any plant and machine and integral features, whether new or second hand, qualify for this 100% deduction.

If you require any further information on the information of the Super Deduction or Capital Allowances in general, get in touch with our Tax Team on 01904 655202.