Businesses investing in plant and machinery may benefit from the super-deduction and special rate first-year allowance 

The government recently introduced the super-deduction and special rate first-year allowance to help businesses with the cost of investing in qualifying plant and machinery equipment.

Eligible businesses can qualify for:

  • A super-deduction providing an allowance of 130% on investments into new plant and machinery, that would normally qualify for the main rate writing down allowance
  • A first-year allowance of 50% on investments on new plant and machinery, that would normally qualify for the special rate writing down allowance

The super-deduction allows for businesses to reduce their tax liability by around 25p for every £1 spent on plant and machinery investments. Businesses that qualify for the first-year allowance for plant and machinery expenditure, could be entitled to a reduction in tax by nearly 10p for every £1 spent.

For the purposes of claiming capital allowances, most tangible capital assets are considered as plant and machinery. The following expenditure are examples of what may qualify for the super-deduction relief:

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

It is important to note that cars do not qualify for the super-deduction relief.

For assets to qualify for the relief they must be brand new, they cannot be second hand or refurbished.

Expenditure must be incurred on or after 1 April 2021 and before 1 April 2023, as a general rule. The super-deduction is not available where the plant and machinery was incurred before 3 March 2021.

Companies must be incorporated to be eligible for the relief however, unincorporated businesses can still benefit from the Annual Investment Allowance (AIA). The AIA allows for a deduction of 100% for qualifying plant and machinery expenditure up to £1 million.

If you are planning to invest in plant and machinery expenditure, our team of tax experts can offer advice to reduce your tax liabilities. Contact us today on 01704 891676, send us a message via our contact page or email info@sptaxeurope.co.uk

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Emily Dodds

Emily Dodds

Marketing and Business Development Officer

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