04 May 2021

Everything you need to know about the capital allowance super deduction


Property and Construction


Tax Reliefs (including R&D)

Last month the chancellor announced a new capital allowance super deduction in the Spring budget – a highly anticipated tax break which is set to supercharge business growth and productivity throughout the UK, with a generous tax break on offer.

However, there is a limited time frame in place and a number of rules that businesses need to be aware of. So it’s crucial to plan ahead, in order to maximise the valuable relief.

How does the super deduction work?

Investments in plant and machinery will qualify for a 130% capital allowance super-deduction. This will create a tax saving of 25p for every £1 spent on fixed assets.

For example, if a company spends £100,000 on new IT and computer equipment, they would be able to deduct 130% of their investment (i.e. £130,000), when calculating their taxable profits. This would generate a £24,700 tax saving in total.

The super-deduction will last for 2 years from 1 April 2021, so if you’re considering investing in plant or machinery, it could be worth considering bringing your plans forward to benefit from the relief.

Who will benefit from the super deduction?  

Limited companies, and if certain conditions are met, landlords and property developers operating through a limited company may also be eligible for the scheme.

Partnerships, LLPs and individuals won’t be able to apply.

Qualifying assets…

Businesses will need to invest in new and unused assets that qualify as main rate pool expenditure to qualify for the relief. This is anything that you keep to use in your business, whether it be computer and IT equipment, office desk and furniture, fitted kitchens, bathrooms or even security and fire alarm systems.

It’s worth noting that second-hand and preowned assets, and companies that buy assets for the sole purpose of leading them out won’t be eligible.

Assets purchased before April 2021

If you’ve bought an asset, or entered a contract to buy an asset before 3 March 2021 (when the super deduction was announced), you won’t qualify. There are anti-avoidance rules in place to ensure that companies don’t cancel their orders and replace them with the intention of claiming.

However, if you entered the contract after 3 March 2021, there could be scope to claim under the super-deduction deepening on when the unconditional obligation to pay for the asset is.

Where do assets bought on finance stand?

Because assets bought on finance are not owned by the company, they won’t be eligible for capital allowances.

This said, assets on ‘hire purchase’ agreements could qualify for relief, as long as they will eventually be owned by your company and have been brought into business use.

How can we help?

Our tax incentives and reliefs team can help to maximise the value of your claim and are here to support you every step of the way. Get in touch today to see how we can help you with your super deduction claim.