Government Launches New Super-Deduction: What Your Business Needs to Know

May 14, 2021

Businesses can now take advantage of the new super-deduction to help invest in plant and machinery, it has been announced.

Described as the “biggest two-year business tax cut in modern British history”, the new capital allowance scheme aims to incentivise investment and kickstart economic recovery.

Here’s what you need to know.

What is the super-deduction?

The initiative is designed to encourage businesses to invest and grow by allowing companies to deduct 130 per cent of the cost of qualifying investment from their taxable profits.

Effectively, it means that a business can reduce their tax bill by up to 25p for every £1 spent.

What can my business invest in?

The 130 per cent super-deduction capital allowance is available on all qualifying plant and machinery investments.

According to HM Revenue & Customs (HMRC), “most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances”.

This can include products such as solar panels, computer equipment and servers, tractors, lorries and vans, office chairs and desks, electric vehicle charge points, foundry equipment and more.

A 50 per cent first-year allowance for qualifying ‘special rate assets’ will also be in force. These are items usually considered ‘integral features’, items with a long life, cars with high CO2 emissions, or thermal insulation of buildings.

When is the qualifying investment period?

The super-deduction can be applied to any qualifying investment made between 1 April 2021 until the end of March 2023.

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