In the Spring 2021 budget, Rishi Sunak unveiled a new “Super Deduction” for businesses. The Super deduction allows 130% deduction on new, qualifying plant & machinery purchased in the two years from 1 April 2021.
The way the new allowance works is that it is a first year allowance at 130% of qualifying expenditure. Whilst the nature of the qualifying expenditure is defined by reference to items which would otherwise go in the general pool, in fact the
expenditure must be kept separate for each asset on which super deduction is claimed. The rules for the super deduction also increase the disposal proceeds to 130%, and this then creates a sting of a higher balancing charge on disposal.
You also need to be careful if your company accounting period straddles 31 March 2023, since the 130% Super deduction will be time apportioned. Thus companies may plan to buy new equipment before 31 December 2022, in
order to benefit from the Super deduction. The AIA is unaffected by this, as you can allocate AIA to whichever assets you choose. You can therefore have 100% allowance up to your AIA, and 130% on expenditure in addition
For example, Capex is £3 million, of which £1 million qualifies for super deduction. Allowances will be:
£1 million at 130% – super deduction
£1 million at 100% – AIA
£1 million at 18% – WDA
Subsequent sale of super deduction assets for, say, £200,000, creates a balancing charge of £260,000.
If you would like further information regarding this and how it could help you, please contact Andrew Law on 01823
286096 or email email@example.com