Enhanced tax relief on capital investment the “Super Deduction”

Enhanced tax relief on capital investment the “Super Deduction”

13/05/2021 by

First Contact

Enhanced tax relief available on capital investment the “Super Deduction”

The recent spring Budget provided a potentially welcome surprise for companies planning to invest in new assets with the introduction of what Rishi Sunak called “Super Capital Allowances”.

The allowance gives tax relief on 130% of the cost of qualifying assets. If assets don’t qualify for the enhanced rate of 130% (“the super deduction”) it is possible a reduced 50% first year allowance could be available (“enhanced special rate”).

The new allowances are available for a two-year period ahead of the planned increase in corporation tax in 2023, when the headline rate will rise from 19% to 25%.  Now could therefore be an opportune time to invest in new IT hardware and infrastructure. 

The new allowances are only available to companies and can be claimed for qualifying expenditure incurred between 1 April 2021 and 31 March 2023. Only the acquisition of new assets will qualify, second hand goods are therefore excluded.

Not all assets will qualify for the enhanced relief.

The Super Deduction is available for expenditure on main pool qualifying assets such as machinery, furniture, fittings, computers, servers and CCTV.  

The Enhanced Special Rate is available for Special Rate assets including integral features in buildings such as electrical and heating systems. 

These new allowances are in addition to the existing Annual Investment Allowance (AIA) which, until 31 December 2021, permits 100% relief for up to £1m of expenditure on qualifying plant and machinery assets.

In most situations it is likely that it would be beneficial to claim the Super Deduction rather than utilising the Annual Investment Allowance that is currently available but depending on individual circumstances this may not always be the case. If you want to discuss the availability of capital allowances in more detail then please contact Nick Donohue who would be happy to discuss this with you in more detail.

Nick Donohue, RPG Head of Tax

Email: [email protected]