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New Capital Allowance Super Deduction

By admin
06 Aug 2021

Back in March one of biggest talking points of the budget was the introduction of the new Capital Allowances Super Deduction

What is the super deduction?

The 130% super deduction capital allowance will provide a tax saving of 25p per £1 spent on qualifying plant and machinery investments. The deductions tie in with the governments Covid-19 policy to get the business investing again and kick start the economy.

How long is the super-deduction available for?

The super-deduction will only be available to companies on qualifying expenditure between 1 April 2021 – 31 March 2023.

What expenditure qualifies?

Qualifying expenditure for the 130% relief would be assets that fall into the main pool for capital allowances:

  • Commercial vehicles
  • Plant and Machinery
  • IT and Office equipment

However it is worth noting that certain expenditure is excluded from the 130% super deduction such as cars.

Is there a cap on the super-deduction

Unlike the Annual Investment Allowance which is capped at £1million there is no cap on the super deduction

Additional conditions of super-deduction

As with most things there are few caveats to the relief. The super-deduction is only available on new items and the purchaser must not have entered into contract to purchase the asset before 31 March 2021.

Example of Super-deduction v AIA under old rules

To speak to an expert and discuss the super-deduction please give the office a call.

When assets in respect of which the ‘super-deduction’ has been claimed are disposed of, the relief is clawed back to the equivalent value of the disposal proceeds. If the company intends to sell the asset at some point in the future it may be more beneficial (subject to availability) to claim the Annual Investment Allowance, particularly if the asset is being acquired this year as the £1m limit has been extended until 31 December.

There are a number of nuances to this allowance (such as date of acquisition, disposal rules, and pro-rating calculation) which we would be happy to discuss with you should you have any queries.

AIASuper Deduction
Asset Cost£100,000£100,000
Deduction from profits(£100,000)(£130,000)
Corporation Tax Saving @ 19%£19,000£24,700

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