Businesses can claim a 130% ‘super-deduction’ on qualifying plant and machinery

As confirmed in the Spring Budget, a 130% ‘super-deduction’ is being introduced to incentivise company investment. For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments.

Under the ‘super-deduction’, firms will be able to cut their taxes by up to 25p for every pound they invest.

What will the new capital allowances scheme offer?

Capital allowances provide taxpayers with the option to ‘write off’ the cost of certain capital assets against taxable income. Companies will have the opportunity to benefit from the following capital allowance measures, and therefore lower their corporation tax bills:

– Super-deduction – this offers companies 130% first year allowance on qualifying main rate plant and machinery from 1 April 2021 until 31 March 2023

What is classed as plant and machinery?

For the purposes of claiming capital allowances, many tangible capital assets used in the course of a trade are considered plant and machinery.

There is not an exhaustive list of plant and machinery assets, but we have listed some examples below:

– Computer equipment and servers

– Tractors, lorries and vans

– Ladders, drills, cranes

– Office chairs and desks

– Carpets

– Refrigeration units

– Compressors

– Foundry equipment

In order to be eligible for the super-deduction, the plant and machinery purchased must be new and not used for leasing.

Example of the super-deduction in practice

A company incurring £1m of qualifying expenditure could claim the super-deduction, and therefore subtract £1.3 million (130% of the initial investment) from its taxable profits. As corporation tax is currently at 19%, the company will make a saving of £247,000 on its tax bill.

There is a separate 50% first year allowance for assets that only qualify for the special rate pool, including long life assets and integral features.

For more information on the super-deduction and other capital allowances, click here.

Further information

For advice tailored to your situation, or support with utilising the super-deduction scheme, please speak to your usual PM+M representative, or get in touch here enquiries@pmm.co.uk

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