TQOTW: Super Deduction Capital Allowances
With businesses slowly coming to terms with the pandemic, my client is considering increasing their capital expenditure and benefitting from the additional super deduction. What are the key points to remember when claiming this additional relief? 

In the Spring Budget, two temporary first year allowances were given Royal Assent on 10 June 2021 with a view to kick starting the post Covid-19 recovery.

These were either a super-deduction in the form of a 130% relief for main plant and machinery pool expenditure. This is referred to as super-deduction expenditure. Or for special rate items where a 50% first year allowance is temporarily introduced. It is therefore important to distinguish between super-deduction expenditure and special rate pool expenditure. This is on top of the already existing annual investment allowance available.

Expenditure is super-deduction expenditure where all of the following conditions are met:

  • it is incurred on or after 1 April 2021 and before 1 April 2023. The normal rules for determining when expenditure is incurred apply with one important exception: where the expenditure was incurred under a contract entered into before 3 March 2021, the expenditure is treated as incurred on the date the contract was entered into.
  • it is incurred by a company within the charge to corporation tax;
  • it is expenditure on plant or machinery which is unused and not second-hand;
  • it is not within any of the general exclusions in CAA 2001, s. 46(2). The exclusions include:
  • where the asset is a car;
  • where the asset is acquired in the period in which the qualifying activity is permanently discontinued; and
  • where expenditure is incurred on the provision for P&M for leasing with the exception of where the P&M is provided under an excluded lease of background P&M for a building;
  • it is not special rate expenditure (as defined at CAA 2001, s. 104A); and
  • it is not expenditure on the provision of plant or machinery for use wholly or partly for the purposes of a ring fence trade. A ring fence trade is a trade in respect of which tax is chargeable under CTA 2010, s. 330(1).

This may be a good time to start having conversations with your clients about increasing their qualifying capital expenditure as many businesses have been holding back due to the pandemic. It may even push some clients to bring forward any planned expenditure as the benefit from this relief will cease in line with the increase in the corporation tax rates from April 2023.

Please feel free to get in touch if you would like any assistance with highlighting super-deduction expenditure or undertaking any form of capital allowances review.

Remember, members of our VIP Tax Team service can call our priority advice line for instant help with tax, VAT and employment queries such as this.

To unlock your access to the advice line, plus tax & VAT consultancy support, monthly eCPD modules, in-depth webinars and more, call 0800 231 5199 or book your free My VIP Tax Team consultation now.

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Tax Advisor
0844 892 2470

Prior to joining the team, Faz worked for PwC for 4 years as a Corporate Tax advisor. During his time there he gained a wide variety of tax experience, ranging from Corporate Tax, Personal Tax, M&A Due Diligence, Trusts, NRLs and Partnerships providing technical advice as well as compliance services to a variety of clients ranging from SMEs to large multi-nationals.

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