Are you making the most of the Super Deduction?

You have probably already heard of the Super-Deduction. It’s a generous tax break designed to incentivise capital investment, handed out to British businesses by the last government. But are you making the most of it? If not, then you should consider enjoying its benefits before they expire. But what are those benefits, and when do they expire?

Companies who invest in qualifying new plant and machinery assets between 1 April 2021 and 31 March 2023 will be entitled to claim:

• A capital allowance of 130% on eligible plant and machinery investments
• A 50% first-year allowance for assets that qualify for special rates

The super-deduction is a generous tax break, allowing businesses to reduce their tax burden by as much as 25p for every £1 invested. This is not an opportunity your business should miss.

The next question you need to ask yourself is this: what counts as plant and machinery? The answer, for the purposes of claiming capital allowances, is: the majority of tangible capital assets utilised in the conduct of a business. That includes a wide variety of equipment: computers, servers, drills, vans, tractors, refrigeration units, foundry equipment, office furniture, and more. However, there is a caveat: to be eligible for the Super-Deduction, all of this equipment has to be new and unused.

The Super-Deduction is only available for businesses who meet the following criteria:

• Your company is subject to Corporation Tax
• The expenditure occurred on or after April 1, 2021, but before April 1, 2023,
• You did not purchase the plant and machinery as a result of a contract made into before March 3, 2021

How much can you claim?

If your fiscal year ends before April 1, 2023, the rate of super-deduction is 130%. If it expires on or after April 1 2023, then you can follow this procedure to figure out how much you can claim:

• Find the number of days your accounting period has prior to 1 April 2023
• Then find the total number of days in your accounting period, and divide the number from step 1 by it.
• Take that result and multiply it by 30
• Add 100 to this number. This is your ‘relevant percentage’
• Take your qualifying super-deduction expenditure, and multiply it by the ‘relevant percentage’

How can you claim?

If you are a limited company, you can claim your capital allowances on your company tax return – you must include a separate capital allowances calculation, and your claim amount is deducted from your profits.

If you want to claim the full value under your annual allowance or first year allowance, then you must claim it during the accounting period in which you purchased the item. If you don’t want to claim the full amount, you can claim part of it using writing down allowances at any time, as long as your business still owns the item.