CAPITAL_ ALLOWANCES_ –_ SUPER_ DEDUCTION
From 1 April 2021 there are new temporary tax reliefs on qualifying capital asset investments.
Capital allowances allow businesses to write off the costs of tangible capital assets, such as plant or machinery, against their taxable income, thereby reducing their tax liability.
For qualifying expenditures incurred from 1 April 2021 until the end of March 2023, companies can claim:
- A super deduction providing 130% first year relief on new and unused plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances, such as: tools, computer equipment, furniture, software, and commercial vehicles (Vans, Lorries).
- A first-year allowance of 50% on new and unused plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances, such as air-conditioning and air-cooling systems, hot and cold-water systems, external solar shading, lifts, escalators and moving walkways and electrical and lighting systems.
The super deduction is uncapped.
Cars do not qualify for this relief as they are specifically excluded.
These super deductions apply to companies only, so LLPs and sole traders will NOT qualify.
NOTE – LLPS and sole traders will still benefit from the £1 million 100% annual investment allowance which remains until at least 31 December 2021.
If a company claims the super deduction on qualifying assets and then sells the asset before 31 March 2023, there is effectively a clawback of part of the super deduction.
If you are planning to make Capital purchases and require further information please contact David Boyd.