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Time is running out for super deduction claims

Want to take advantage of the Corporation Tax super-deduction capital allowance scheme?

You only have weeks left to make the most of this scheme, which allows businesses to claim back 130 per cent on investments made in plant or machinery.

The scheme runs until 31 March 2023 and with Corporation Tax rates set to rise in April 2023 for more profitable businesses, time is of the essence.

The scheme was an incentive to invest in new assets to aid the recovery of companies after the pandemic.

The measure allows organisations to claim a super-deduction providing an allowance of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances.

They can also use the first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing-down allowances.

What are plant and machinery?

There are many forms of ‘tangible’ assets used in the day-to-day running of a business. Some examples include:

Certain expenditure is excluded, for example, the acquisition of company cars. To benefit from the relief the assets purchased must also be new and not second-hand or refurbished equipment.

How does the super deduction work?

A company incurring £1 million of qualifying investments decides to claim the super-deduction.

Spending £1 million will mean the company can deduct £1.3 million (130 per cent of the initial investment) in working out its taxable profits.

Deducting £1.3 million from its taxable profits will save the company up to 19 per cent of that – or £247,000 on its Corporation Tax bill.

Can unincorporated businesses make a claim?

The relief is only available to limited companies, but unincorporated businesses can 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.

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