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Available since April, the super-deduction of 130% first-year capital allowance was introduced to stimulate business investment in qualifying plant and machinery assets.

Running from 1 April 2021 until 31 March 2023, companies will be able to claim:

  • a 130% super-deduction capital allowance on qualifying plant and machinery investments
  • a 50% first-year allowance for qualifying special rate assets

The super-deduction will, it is hoped, encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow. Pandemic-related uncertainty has dampened business investment, which fell 11.6% between Q3 2019 and Q3 2020. It is to be noted that the super deduction is only available to companies that pay corporation tax, so individuals, partnerships and LLPs are not eligible.

The super-deduction offer is one of four capital allowance measures that companies can benefit from. Also available are:

  • The 50% first-year allowance (FYA) for special rate (including long life) assets until 31 March 2023
  • The Annual Investment Allowance (AIA) that provides 100% relief for plant and machinery investments up to a £1 million threshold, until 31 December 2021
  • Within Freeport tax sites, companies can access new Enhanced Capital Allowances (ECA+). Companies, individuals, and partnerships can benefit from an increased level of Structures & Buildings Allowance (SBA+) for investments until 30 September 2026. 

What are capital allowances?

Capital allowances allow taxpayers to write off the cost of certain capital assets against taxable income. These take the place of accounting depreciation, which is not normally tax deductible. Businesses deduct capital allowances when calculating their taxable profits.

For further information, please see the Super-deduction factsheet for more information.

If you would like additional help on this, or any other tax related topic please get in touch, my email address is beverley.howells@torgersens.com.

About the Author

Beverley Howells Image

Beverley Howells

Partner
Beverley is a partner with Torgersens, specialising in tax. Her role covers all aspects of taxation, from managing compliance to providing business advice. Her main areas of expertise are in business tax and corporation matters and in particular, acting for owner-managed businesses. Having joined the firm as a graduate trainee, Beverley qualified as a Chartered Accountant in 2000.   Outside of work, Beverley’s favourite place is the beach, enjoying a walk along our beautiful North East coastline. Ideally, she would be joined by a canine companion and has recently started a campaign for her own office dog! 

To get in touch please e-mail beverley.howells@torgersens.com.

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