Super deduction – a recap of the new relief

Date posted: 10th Sep 2021

Unexpectedly introduced at the 2021 Budget, the 130% deduction essentially allows companies to reduce their tax bill by up-to 25p for every £1 invested.

The amount of relief depends upon the type of asset acquired and it is important to remember that the asset must:

  1. Be new and unused.
  2. Be plant and machinery – specific definitions apply.
  3. Not be a car.
  4. Be bought by a company – sole traders, partnerships and LLP do not qualify.

In addition, if any asset has an expected lifespan of more than 25 years, then the expenditure is unlikely to qualify for the 130% uplift.

Acquiring “integral features” such as electrics, plumbing, lifts etc will qualify for the lower 50% special rate allowance. However, it may be worth claiming the existing Annual Investment Allowance (AIA) which works alongside the super-deduction, instead, if this is available. The AIA allowance is capped at £1m (until 31 December 2021) whereas the super-deduction has no upper limits.

As a final reminder, the rate of super-deduction allowance may begin to decrease for assets acquired post 1 April 2022, so it is important to review your plans for capital expenditure, sooner rather than later

If you have any queries, please call us or contact us here.


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