From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim the super-deduction.

What is the super-deduction?

Put simply, the super-deduction aims to incentivise company expenditure and investment as the country is emerging from lockdown. Hopes are that companies will hit the ground running instead of having a slow, difficult period to pick back up. Aiming to stimulate business investment and promote economic recovery, the super-deduction is a 130% first-year capital allowance for qualifying plant and machinery assets.

Allowing companies to reduce their tax bill by up to 25p for every £1 they invest, the super-deduction has been praised as exciting and innovative. This is supported by encouragement for companies to invest in productivity-enhancing plant and machinery assets to drive the economy forward.

Why is the government introducing a super-deduction?

Following a turbulent and difficult year for many UK business after the Covid-19 pandemic, businesses have needed support to not only stay afloat but to also grow. As all existing levels of economic investment have fallen, it has caused unprecedented chaos for businesses however, these issues are not all pandemic related. Problems stretch back further than the last 12 months.

Since 2008, weak business investment has played a significant role in the slowdown of productivity. This combined with historically low levels of business investment compared to our peers has contributed to much of the UK’s productivity gap.

Making capital allowances more generous therefore, stimulates business investment. As a result, these measures can promote economic growth and counter business cycles. Encouraging more businesses to make additional investments, the super­-deduction give companies a stronger incentive whilst also motivating them to bring their planned investments forward and deliver a much-needed boost to the UK economy.

How the super-deduction can help you

Capitalising or buying assets during this super-deduction period could save your business money by reducing your corporation tax. The super-deduction applies to new plant and machinery that ordinarily qualifies for the 18% main pool rate. Examples of these include:

  • Computer equipment and servers
  • Tractors, lorries, vans
  • Ladders, drills, cranes
  • Office chairs and desks
  • Electric vehicle charge points
  • Refrigeration units
  • Compressors
  • Foundry equipment

Buying assets in this period can save your company money by reducing your corporation tax. For example, spending £1m on qualifying investments will mean your company can deduct £1.3m (130% of the initial investment) in computing its taxable profit.

Key facts to note for the 130% super-deduction

The super-deduction does not apply to:

  • Cars – although it can be claimed on commercial vehicles.
  • Assets leased out or to assets hired out (e.g. a hire fleet). However, in the construction industry, HMRC should accept that plant provided predominantly with an operative is more than just hire, and therefore is not excluded, so can qualify.
  • Used or second-hand items.

Other super-deduction points to consider:

  • Any assets going into the special rate pool, such as integral features or long life assets, only qualify for a 50% super-deduction.
  • Only companies qualify – not sole traders or partnerships.
  • The super-deduction is only available for expenditure under contracts entered into from 3 March 2021
  • If you sell the asset, you have to bring in 130% of the proceeds as a balancing charge.

More information of the super-deduction can be found here on the Gov.uk website

Do you qualify for the super-deduction?

If you need help knowing how to qualify for the super-deduction incentive, Cooper Accounting can assist. To be eligible, there are a couple of parameters you must meet. Your company must be within charge of Corporation Tax and expenditure on qualifying assets must be incurred between 1 April 2021 and 31st March 2023. For more help with this, get in touch with the team.

How can Cooper Accounting help?

We offer a creative approach to accountancy for creative business people.

A big part of our service is educating our clients on everything they need to know about their accountancy.

If you are looking for advice on the super-deduction or would like to learn more about the services we offer, then please get in touch. Call 01422 892000 or email hello@cooperaccounting.co.uk