What is the 130% Super-Deduction Capital Allowances

The 2021 Budget announced a new and extremely generous first year allowance for Main Pool Plant at 130% and also a 50% First Year Allowances for Special Rate Plant.

These will be temporary increases in tax relief for companies who invest in certain types of new plant and machinery between 1 April 2021 and 31 March 2023.

Although a generous give back by the Treasury, as ever the devil is in the detail and not everyone, or all types of expenditure are going to benefit in the same way.

AIM OF THE RELIEF

Capital allowances allow businesses to write off the costs of tangible capital assets, such as plant or machinery, against their taxable income. They take the place of commercial depreciation, which is not an allowable tax deduction.

Capital Allowances are often used as a mechanism to encourage investment in turbulent economic times. The effect is that it encourages investment to occur earlier than would be planned and to stimulate the property sector as well as general investment.

First-year allowances allow enhanced rates of relief for certain plant and machinery investments, providing claims are made in the period the expenditure is incurred. The super-deduction is an enhanced first-year allowance providing an allowance exceeding the cost of the asset.

The Treasury thinks that the addition of super deductions to Britain's capital allowances system, will make it amongst the most competitive in the world for business. However, the real in-depth specifics of what expenditure will fall into the scope for the super deduction are not yet known.

To find out more about the new first year capital allowances read our attached article.

https://cavettaconsulting.co.uk/wp-content/uploads/2021/03/Capital-Allowances-Super-Deductions.pdf

About author

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Lois Stirling
Tax Adviser