Blog
The Super-Deduction
1 July 2021 | by Tim Frankland
2
MIN
For expenditure incurred from April 1st 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments.
Most tangible capital assets used in the course of business are considered plant and machinery for the purpose of claiming capital allowances.
This change will make the UK’s capital allowance regime more internationally competitive, lifting the net present value of our plant and machinery allowances from 30th in the OECD to 1st.
In order to qualify for the super-deduction, you must be a corporate entity paying corporation tax on taxable profits.
Examples of the Super-Deduction
- A company incurring £1m of qualifying expenditure decides to claim the super-deduction
- Spending £1m of qualifying investments will mean the company can deduct £1.3m (130% of the initial investment) in computing its taxable profits
- Deducting £1.3m from taxable profits will save the company up to 19% of that – or £247,000 – on its corporation tax bill
Previous System
- A company spends £10m on qualifying assets
- Deducts £1m using the AIA in year 1, leaving £9m
- Deducts £1.62 using WDAs at 18%
- Deductions total £2.62m – and a tax saving of 19% x £2.62m = £497,800
With Super-Deduction
- The same company spends £10m on qualifying assets
- Deducts £13m using the super-deduction in year 1
- Receives a tax saving of 19% x £13m = £2.47m
Interested in finding out more?
Contact one of our team to discuss
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