Super deduction for capital expenditure

Larger companies may have opted to wait until April 2023 before making major investments in plant or machinery to achieve tax relief of 25% on those costs following the increase in the corporation tax rate.

However, the Government wants to encourage those companies to invest sooner so is offering a super deduction of 130% of capital expenditure on new qualifying plant and machinery. The contract to buy must be entered into on or after 4 March 2021 and the purchase must be made between 1 April 2021 and 31 March 2023.

This 130% deduction will only apply to assets eligible for the main capital allowances pool with writing down allowances normally given at 18%. Cars do not qualify for this super deduction unless they are specially adapted for use in a driving school.

Expenditure on other new assets such as fixtures and integral features in buildings will qualify for a 50% deduction in the year of purchase if acquired before 1 April 2023. The remaining cost of these assets will qualify for a writing down allowance at 6% per year.

These enhanced deductions for the cost of new assets apply alongside the 100% deduction available under the annual investment allowance which covers up to £1 million of expenditure per year until 31 December 2021. We can help you decide on the most efficient timing of expenditure to maximise the reliefs available.

Budget 2021 – Business Taxes