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Less than a year left to make use of the super-deduction tax relief

Incorporated businesses now have less than 12 months remaining to make full use of the super-deduction before this temporary tax relief ends on 31 March 2023.

This capital allowance scheme, which was launched in 2021, allows businesses investing in qualifying plant and machinery assets to benefit from first-year capital allowance of up to 130% of the expenditure incurred.

This allows companies to cut their tax bill by up to 25p for every £1 they invest in qualifying expenditure. If an addition does not qualify for the enhanced 130% relief, it may benefit from a 50 per cent first-year allowance for qualifying special rate (including long life) assets, such as air conditioning.

Thanks to the super-deduction, companies will be able to claim allowances of 130 per cent on most new plant and machinery investments that ordinarily qualify for lower main rate writing down allowances of 18%.

Businesses can claim a first-year allowance of 50 per cent on most new plant and machinery investments that would ordinarily qualify for special rate writing down allowances.

To benefit from the relief, the assets purchased must be new and not second hand or refurbished equipment.

Unfortunately, the relief is only available to incorporated companies, but unincorporated businesses, such as partnerships and sole traders, can continue to benefit from the Annual Investment Allowance (AIA) which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million until March 2023.

With only a year remaining for companies to make full use of both of these generous capital allowance schemes there is a need to act now and plan investments wisely.

It may be beneficial, in some cases, to bring forward planned expenditure for future years to take advantage of these schemes in the current tax year.

If you have questions regarding the capital allowances, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494 552100 and ask to speak to Liza Rowles or Gavin Styles our specialist business tax advisors.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 27 April 2022.