SUPER-DEDUCTION
Super-Deduction tax incentive for business
The super-deduction allowance is the most attractive tax incentive for business investment ever offered by UK government – here’s how it can help your business accelerate its journey to net zero.
What is the super-deduction allowance?
Super-deduction’ is a generous new tax allowance, that permits companies to claim up to a 130% deduction against profits for qualifying plant and machinery purchased between 1 April 2021 and 31 March 2023. This is accompanied by a first-year allowance (FYA) of 50% on other qualifying special rate assets that ordinarily qualify for 6% special rate writing down allowances.
The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest in new plant and machinery assets. We advise making use of the allowance while you can.
Download our Super-deduction FAQ for full details:
How does it work in practice?
If you spend £100,000 on qualifying equipment, you could be looking at savings of £24,700. Here’s how that works:
Let’s say your business spends £100,000 on qualifying equipment, such as solar panels. When you calculate your taxable profits your corporate tax deduction will be £130,000 (which represents 130% of your initial investment).
Deducting £130,000 from your taxable profits will save your business up to 19% (the current rate of corporation tax) of that. So 19% of £130,000 = £24,700, which is how much corporation tax you would save using the super-deduction allowance.
Normally, investment in new plant and machinery assets would only be eligible for a ‘writing down allowance’ (WDA), which is set at 18%. Using the above example, a company would save just £3,420 through a WDA, so the savings available through the super-deduction scheme are significant.
What assets qualify for the super-deduction allowance?
The allowance applies to all new plant and machinery that ordinarily qualifies for the 18% main pool rate of writing down allowances. Or, as HMRC says, “Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances.”
This includes items such as office furniture, tools, and refrigeration units, but also notably those associated with energy efficiency improvements, including the below services.
Contact Us
