A new capital allowance scheme became available to companies from 1 April, offering them an incentive to invest in new assets to aid their recovery after lockdown.

The new super-deduction and special rate first-year allowance scheme runs until 31 March 2023 and aims to help businesses invest in qualifying plant and machinery by offering Corporation Tax relief.

This super-deduction effectively allows companies to reduce their tax obligations by nearly 25p for every £1 they invest.

Similarly, companies that are entitled to the first-year allowance for plant or machinery could access a reduction in tax of nearly 10p for every £1 spent.

Thanks to the super-deduction companies will be able to claim allowances of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances, such as:

  • Compressors
  • Computer equipment and servers
  • Electric vehicle charge points
  • Foundry equipment
  • Ladders, drills, cranes
  • Office chairs and desks
  • Refrigeration units
  • Solar panels
  • Tractors, lorries and vans.

You can also claim a first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances. Special rate investments include:

  • Parts of a building considered integral – known as ‘integral features’
  • Items with a long life
  • Thermal insulation of buildings

To benefit from the relief, the assets purchased must be new and not second hand or refurbished equipment.

The relief is only available to incorporated companies, but unincorporated businesses continue to benefit from the Annual Investment Allowance (AIA) which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million.

The AIA also remains available alongside the super-deduction for incorporated businesses, so businesses must review how they use these schemes together to maximise the tax relief available.

If you would like advice on these and other existing capital allowances, please contact us.

Posted in Blog.