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.
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