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%.
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.
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%.
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.
If you would like to discuss this or other tax saving opportunities, please
contact us