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The new Super Deduction is simply super

3rd March 2021

From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

  • a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
  • a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances

The measure also temporarily amends the rules covering expenditure incurred on plant and machinery used partly in a ring fence trade in the oil and gas sector.

The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest.

It will encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow, and to make those investments now

Not covered by the super deduction will be expenditure incurred on cars (although vans will be allowed) and assets purchased in the year of ceasing trade.

But what will be the impact of making this a two-year relief? Will that be long enough to incentivise really large/complex investments?

Further details have been published by HMRC.and the legislation is subject to Parliamentary approval.  

See also the super deduction Factsheet (PDF 151KB, 3 pages)

Alongside this super deduction, the rate of corporation tax will increase to 25% for profits of more than £50,000.  In addition, the 100% Annual Investment Allowance remains available.

Other government measures in place to support businesses and workers during the coronavirus pandemic can be found in our Business after COVID-19: Transition Knowledge Hub.

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