The 130% ‘super-deduction’, announced in the Spring Budget in 2021, was introduced to incentivise company investment. For expenditure incurred until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery purchases.
Under the ‘super-deduction’, firms are able to cut their taxes by up to 25p for every pound they invest.
It seems many companies who may still be recovering from the coronavirus pandemic have not yet taken advantage of the special tax relief. Covid-19, coupled with the war in Ukraine, may have made companies reluctant to invest until the political and economic situation stabilises.
How does the ‘super-deduction’ work?
Businesses that claim in time could see tax savings of up to 25p for every £1 that they invest, meaning a £1million investment could see a corporation tax saving of £247,000, compared with just £190,000 under the previous system.
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
– Refrigeration units
– Foundry equipment
Are there any exemptions?
To be eligible for the ‘super-deduction’, the plant and machinery purchased must be new (second hand assets do not qualify) and not used for leasing although assets purchased for use in a commercial building that is leased out, do qualify.
Additionally, only companies within the charge to corporation tax qualify for the relief, sole traders and partnerships do not.
Get in touch
If you are interested in taking advantage of the ‘130% super-deduction’ but have concerns or questions around utilising the scheme, please speak to your usual PM+M representative or get in touch by emailing firstname.lastname@example.org.