Making the most of the super-deduction

The super-deduction encourages firms that pay corporation tax to bring forward their investment in plant and machinery.

30 June 2021

New business support announced at the Budget

The Chancellor announced at this year’s Spring Budget a series of measures to help the economy recover from the pandemic. This included new temporary capital allowances that will encourage businesses of all sizes to invest and grow now rather than later.

The super-deduction

The super-deduction allows companies to claim 130% capital allowances on qualifying plant and machinery investments, compared to the usual 18%. This means that for every pound a company invests, their taxes are cut by up to 25p. This is available to all firms of all sizes, so long as they pay corporation tax.

What’s covered by the tax relief

Most tangible capital assets are considered plant and machinery for the purposes of claiming capital allowances. For example, these could be solar panels, computer equipment and servers, tractors, cranes, office chairs or fridges. All the assets must be new and unused. Certain assets do not qualify like cars, or plant or machinery that is intended to be leased out. There is no cap on the value of the qualifying assets.

This Government briefing provides additional information and explanation, and this short video providers a helpful high-level overview.

Additional capital allowances

The super-deduction will apply alongside the existing Annual Investment Allowance, which already gives 100% relief for qualifying plant and machinery up to £1 million until 31 December 2021.

Within Freeport tax sites, companies can access new Enhanced Capital Allowances (ECA+) and companies, individuals and partnerships can benefit from an increased level of Structures & Buildings Allowance (SBA+) for investments until 30 September 2026.

This blog from UK Finance provides more information why some businesses may want to make use of these allowances.

Next steps

For more information contact the FMB’s tax business helpline for free and unlimited expert advice.

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