Posted: 12 / 04 / 2021
In his Budget speech last month, the Chancellor announced a new “super-deduction” which allows companies to claim a 130% deduction against profits for any new plant and equipment purchased between 1 April 2021 and 31 March 2023.
The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest (rather than by 19p under the previous rules). It is designed to encourage companies to invest in plant and machinery assets that will help them grow and to make those investments now.
Some examples of plant and equipment that the super-deduction will apply to are:
- Commercial vehicles (not cars)
- Computer equipment
- Office furniture
- Machinery
- Tools
- Kitchen equipment in pubs and restaurants
- CCTV equipment
- Shop fittings
- Racking etc. in warehouses
If you are considering investing in new plant and equipment to take advantage of the super-deduction, it’s important to note that:
- Only companies can claim the super-deduction. Sole traders, partnerships and LLP’s cannot claim it.
- The super-deduction can’t be claimed if the plant and equipment is second hand, it must be brand new.
- It’s not for cars, not even electric cars, but vehicles not defined as cars do qualify (e.g. vans, lorries etc.).
- The super-deduction is time apportioned for accounting periods that straddle 1 April 2021 and 31 March 2023.
- If you sell an asset that has previously received the super-deduction, there will be a clawback of the tax relief.
- The super-deduction can’t be claimed if the plant and equipment is going to be leased to a third party.
- Similarly, the super-deduction can only be claimed on plant and equipment that is purchased. It can’t be claimed if clients don’t own the asset in question (for example if the asset is hired or leased).
For any questions on the super-deduction, please contact Leyton Jeffs for funding and David Evans for guidance on tax.