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Corporate Super Deduction

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Corporate Super Deduction

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Corporate Super Deduction
What is it?
  • It is a 130% first year allowance deduction for expenditure incurred in purchasing plant & machinery that would normally qualify for a main rate writing down allowance of 18%.
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    When can you claim it?
  • You can claim it for expenditure incurred on or after 1st April 2021 up to and including 31st March 2023.
    • When is the expenditure deemed to be incurred? 
  • The general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it.
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    What constitutes qualifying P&M?
  • What is allowed are assets which would normally attract the writing down allowance of 18% or historically the 100% Annual Investment Allowance. Possible examples include;
    • zero emissions goods vehicles, or 
    • new plant, machinery or equipment acquired by a Small and Medium sized Company.
    • Driving instructor cars with dual control, black cabs, double cab pickups with a payload of one tonne or more – as long as the Co2 emissions do not exceed 50g/km.
    • What does not qualify?
  • Second-hand assets.
  • Cars other than those already stated.
  • Long life asset expenditure.
  • Connected party transactions.
  • The expenditure incurred on the plant or machinery which will be leased out.
  • Any expenditure incurred on an asset which would attract the special rate writing down allowance of 6%.
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    Things worth noting
  • Do not buy any assets prior to 1st April 2021
  • If the asset is deemed to have been disposed of (e.g. sold, destroyed and insurance monies received, no longer used in the trade etc.) then a balancing tax charge could arise on disposal.
  • If the asset is deemed to have been disposed of anytime up to and including 31st March 2023, then the disposal value to be used would be increased by a further 30% which could increase the tax due. 
    • Planning point – where feasible defer the disposal until after 31st March 2023 if possible.
  • If accounting year in which the expenditure is incurred straddles the 31st March 2023, then the Super Deduction Allowance is apportioned. 
    • Planning point - perhaps consider changing the year end to before 1st April 2023. 
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    If you would like to discuss this or other tax saving opportunities, please contact us
     
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