What can super-deduction do for your business?

To help with the economic recovery from the COVID-19 pandemic, the Chancellor has announced a new enhanced capital allowance, the ‘super deduction’.

Available to businesses that are subject to corporation tax, the super deduction gives businesses investing in equipment a much higher tax deduction than usual. The allowances apply to capital investments made between 1 April 2021 and 31 March 2023.

Here’s a breakdown of what this means for business

The super deduction offers a tax deduction equal to 130% of expenditure on new plant and machinery from 1 April 2021 to 31 March 2023. It applies to companies purchasing assets that usually belong in the CAs main rate, not to assets that would qualify for the special rate pool. These would receive a 50% initial allowance followed by normal allowances.

There is no limit or cap to this allowance, unlike with the annual investment allowance, which when it reverts to ￡200,000, the super-deduction will be even more valuable to companies spending more.

If your financial year is soon ending, bring forward any P&M expenditure you have planned for next year to receive greater corporation tax savings earlier. However, if your spending plans are nearer to the super-deduction end date, consider delaying purchases until after the end date to have profits subject to the new 25% corporate tax rate, for a greater tax saving.

To ensure maximum tax efficiency, it is essential to take into account your dates, the super-deduction and CT rates. If you’re wondering what the best move for your business is, get in touch to ensure you’re getting the best rates.

Check the Gov Fact Sheet for more information on the super deduction tax, or get in touch for tailored advice to your business.