Why was super-deduction introduced?
Super-deduction allows companies, that are subject to corporation tax, to cut their tax bill. This is done by claiming 130% capital allowances on qualifying expenditures. This allowance was introduced by the government for 2 years for capital spent from 1 April 2021 to 31 March 2023, to encourage business growth and investment after businesses took a hit financially during the pandemic. Qualifying purchases of new plant and machinery would either be placed under the main pool of super-deduction or in the special pool as a 50% first-year allowance.
Learn more about Super-deduction
What can I claim 130% capital allowances on?
Plant and machinery
Items that are used for the purpose of the trade are referred to as plant and machinery when claiming capital allowances. What qualifies as plant and machinery is not defined in law and therefore can be overlooked if not reviewed by an expert.
Learn more about ‘What is classified as plant & machinery’
When reviewing expenditures, qualifying items are divided up into the main rate pool, in which super-deduction relief can be claimed, and the special rate pool, where the first-year allowance relief is claimed.
What can this include?
Capital allowance pools
Examples of items in the main rate pool:
- Computer equipment
- Property embedded fixtures and fittings
- Office equipment
Examples of items in the special rate pool:
- Solar panels
- Water pipes
- Electrical systems
These are only a select few and there are many more items, so leaning on expert advice is important.
Can I claim after 31 March 2023?
When the end date arrives, don't switch off just yet!
Claiming beyond April 2023
It all depends on the timing of when the spend is:
Reviewed
Old expenditures can still be claimed after the deadline on the basis that any qualifying items were purchased from 1 April 2021 to 31 March 2023. Technically, super-deduction will continue to form part of capital allowance reviews up until 31 March 2025 due to the ability to amend & resubmit tax returns where super-deduction is available.
Incurred
Any expenditure incurred after 31 March 2023 will not qualify for this tax relief. Therefore, if there’s a possibility work on a project could be brought forward, this may benefit the business in making sure they qualify for this relief.
Unconditionally agreed
If work is unconditionally agreed on or before 31 March 2023 then you have 4 months after for the spend to still qualify. Proof of this will always need to be attained to ensure no problems will arise if HMRC ever raises an inquiry.
This is where the importance lies in ensuring that all available tax relief has been secured correctly with the help of a specialist team.
Something to keep in mind...
With many businesses looking to make the most of this tax relief whilst available, we would recommend obtaining and holding all relevant information to substantiate a claim for super-deduction. All businesses claiming super-deduction need to be mindful of the qualifying conditions, time restrictions & documenting requirements to remove the potential risks and stresses in the event of an HMRC inquiry.
Latest News
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5 December 2023Capital Allowances Manual
Capital allowances play a significant role in taxation. Allowing businesses to claim deductions for the depreciation of their assets. Among these assets, plant and machinery are frequently mentioned. However, the term “plant and machinery” is not explicitly defined in tax law. It should also... -
22 November 2023
Autumn Budget 2023: Changes to Capital Allowances
The Autumn Budget of 2023 has arrived, and with it comes significant changes and developments the government has put in place. Chancellor Jeremy Hunt delivered the statement on Wednesday, 22 November 2023. For businesses and individuals alike, these adjustments in tax policies can have far-reaching implications.
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