How does the super-deduction work?
For expenditures incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments. Under the super-deduction, for every pound a company invests, their taxes are cut by up to 25p.
There are different types of capital allowances for different types of investments and you can find out more by downloading our guide here.
Only applies to:
Companies within charge to Corporation Tax
Covers expenditure incurred from 1st April 2021 to 31st March 2023
Only relates to new and NOT used/second-hand assets
Applies an enhanced first-year allowance (FYA)
What plant and machinery is included?
Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances.
Super-deduction includes all new plant and machinery that would ordinarily qualify for the 18% main pool rate of capital allowances and covers new plant and machinery that qualify for the 6% special rate pool, including integral features in a building and assets with a life of over twenty-five years.
Main Pool Rate
Property Embedded Fixtures and Fittings
Computer Equipment
Office Equipment
...And much more
Special Rate Pool
Solar Panels
Water Pipes
Electrical Systems
...And much more
Businesses will now benefit from four significant capital allowance measures:
The super-deduction
That offers 130% first-year relief on qualifying main rate plant and machinery investments until 31 March 2023 for companies
The 50% first-year allowance
For special rate (including long life) assets until 31 March 2023 for companies.
Annual Investment Allowance (AIA)
Providing 100% relief for plant and machinery investments up to its highest ever £1 million thresholds, until 31 March 2023
Freeport Tax Sites
Companies can access new Enhanced Capital Allowances (ECA), and companies, individuals, and partnerships can benefit from an increased level of Structures & Buildings Allowance (SBA) for investments until 30 September 2026.
Example One
Here we show a simple example of the benefit generated when using super-deduction. It indicates the importance of not only knowing what expenditure qualifies but also understanding what tax breaks are available.
Example Two
Here we show a comparison of how super-deduction can impact the level of tax savings available, in the year of expenditure, when compared to using the Annual Investment Allowance (AIA) and the standard Writing Down Allowance (WDA) at 18%.
FAQ's
What qualifies for super-deduction?
Super-deduction can be claimed against many items of plant and machinery. The expenditure must have been incurred between 1 April 2021 and 1 April 2023.
What assets qualify?
Some examples of qualifying assets are:
Office furniture, computers, and warehouse machinery.
There are many more qualifying assets. Get in touch with our team to find out more.
When did super-deduction start?
On 3 March 2021 the government announced the new super-deduction tax relief to enhance investment within businesses. This is scheduled to end on 31 March 2023, limiting the time period companies have to benefit from this relief.
Is super-deduction for companies only?
Yes, this tax relief is only available to companies that are subject to Corporation Tax.
Super-deduction Article
You can find more Technical information, Q&A, and more examples in our blog ‘Super deduction explained’
