Loans, Grants and Deferrals

Take advantage of the super-deduction from 1 April 2021

March 15, 2021

At the start of April, the Government will introduce the new super-deduction and special rate first-year allowance to help businesses invest in qualifying plant and machinery, as the nation looks to rebuild.

This new capital allowance scheme will be available to companies from 1 April 2021 to 31 March 2023, offering them an incentive to invest in their recovery.

If you are looking to purchase eligible equipment it may be worth waiting for the introduction of this relief next month, as you will be able to claim:

  • A super-deduction providing allowances of 130 per cent on most new plant and machinery investments that ordinarily qualify for main rate writing down allowances
  • A first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances

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.

Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances and as such there is not an exhaustive list of plant and machinery assets.

However, the following may be able to benefit from these new capital allowances:

  • 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.

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.

If you are looking to invest in plant and machinery in the near future then it may be worth waiting until after 1 April. If you would like advice on these and other existing capital allowances, please contact us.

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