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21 June 2021

Super Deductions

In light of the unprecedented impact of the Covid-19 pandemic, and with UK business investment falling 11.6% between Q3 2019 and Q3 2020, the Government has sought to find ways to encourage recovery and to reward businesses investing in, and bringing forward, their future growth plans.

The super-deduction

As part of this wider support, the super-deduction concept has been introduced. This will apply from 1 April, 2021 until 31 March, 2023. During this time, the following enhanced allowances will apply:

  • The super-deduction itself offers 130% first-year relief on the qualifying plant and machinery listed below.
  • An Annual Investment Allowance of £1 million which offers 100% relief on investments in plant and machinery until 31 December, 2021.
  • A further 50% first-year allowance for assets which would normally qualify for the special rate writing down allowance, such as integral features to buildings.
  • Enhanced Capital Allowances and increased Structures & Buildings Allowances for investments within freeport sites up to 30 September, 2026.

What counts as plant and machinery qualifying for the super-deduction?

Day-to-day running costs, interest payments and buying items related to your business’s trade are all just considered business expenses which can be offset against your profits for calculating your tax liability. Instead, capital allowances cover some larger financial investments, and the super-deduction, or the 50% first-year allowance deduction, are available on a number of asset classes, including the following:

  • Equipment
  • Machinery
  • Business vehicles (including vans and lorries)
  • Integral features to buildings (such as lifts and air conditioning)
  • Some fixtures and fittings (such as toilets and kitchen facilities)

Things to consider

There are possible complications both for following accounting years and those spanning the eligibility period, as well as for items bought under the scheme which are sold later.  There are also a number of restrictions in place for certain types of expenditure, including expenditure on used or second-hand assets, and the super-deduction is only available to companies.

Recently, the opportunity to utilise super-deductions has been extended to landlords, property investors and those with Property Company/Operating Company structures within the business. This means equipment such as lifts, air conditioning and electrical and heating systems used in these properties now fall within the eligibility criteria. You should work with your LB advisor to identify what items can potentially be included if this affects you.

If you believe you could take advantage of the super-deduction allowance for your business, then do get in touch – it could be the incentive you’ve been looking for to move your business to the next level. We can help you avoid any pitfalls in eligibility and provide the expert support needed to make sure you’re compliant and able to make the most of the opportunity.