What is a super deduction?

It allows companies to claim a 130% first year allowance (FYA) for investment incurred on qualifying plant and machinery acquired between 1 April 2021 and 31 March 2023.

Under the super deduction, for every pound a company invests, their taxes are cut by up to 25p.

The government announced the super deduction in the March 2021 Budget, in the hope that the scheme will encourage business investment and stimulate economic growth.

The super deduction scheme is only available to Limited Companies and unfortunately sole traders can’t benefit.

As an example of the available savings:

If you spend £100,000, the corporation tax deduction will be £130,000. You will save 19% on £130,000, which equals £24,700.

What is plant and machinery?

These are items that you buy and retain for use in the business.

Items that are classed as plant and machinery include:

• Solar panels
• Tractors, lorries and vans
• Ladders, drills, cranes
• Computer servers and equipment
• Software
• Office desks and chairs
• Electric vehicle charge points
• Refrigeration units

What assets can’t be included?

Items that are excluded as plant and machinery:

• Mains water
• Land
• Structures, e.g. bridges, roads and docks
• Buildings
• Items for business entertainment such as a motor  yacht or a karaoke machine

Second hand items don’t qualify for super deduction because the items must be new. The only exception to this rule would be buying a lorry that had been used as a demo showroom model for example, as these can often be considered new.

Assets on hire purchases do qualify, as long as they are treated as being owned by the Limited Company who are making the required payments. Assets paid for through a finance lease don’t qualify for the super deduction relief.

Speak to the Umbrella Accountancy team today to understand if your potential new assets will be eligible for super deduction.