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Making the most of the super-deduction capital allowance scheme

The new super-deduction capital allowance launched on 1 April 2021 to help companies looking to invest in qualifying new plant and machinery.

This tax relief is designed specifically to encourage firms to invest in assets that will help them grow and recover from the impact of COVID-19, as part of the Government’s ongoing package of financial support.

This new capital allowance scheme will now be available to companies from 1 April 2021until 31 March 2023, offering them an incentive to invest in new assets to aid their recovery.

Using the super-deduction, companies can claim:

  • A super-deduction providing allowances of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances, such as:
    • Compressors
    • Computer equipment and servers
    • Electric vehicle charge points
    • Foundry equipment
    • Ladders, drills, cranes
    • Office chairs and desks
    • Refrigeration units
    • Solar panels.
  • A first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances. Special rate investments include:

– Parts of a building considered integral – known as ‘integral features’

– Items with a long life

– Thermal insulation of buildings

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

The relief is only available to incorporated companies, but unincorporated businesses 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.

The AIA also remains available alongside the super-deduction for incorporated businesses as well, so businesses must review how they use these schemes to maximise the tax relief available.

If you would like advice on these and other existing capital allowances, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494552100.

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 10 May 2021.