Super Deduction. 

Claiming Super Deduction is a fantastic Tax Relief for business owners that invest in their business. 

It is no surprise that more and more of our clients have recently been asking us about this relief. 

In this blog post, I will be explaining what Super Deduction is and how you can enjoy this tax relief.

What is Super deduction?

Super Deduction is a tax relief that can be claimed by business owners that invest in qualifying plants and machinery.

This tax relief is claimed at:

• 130% of the cost of qualifying material 
• 50% of the Special Rate plant and machinery 

Super Deduction is not a new Tax Relief. Before, this tax relief was claimed under Capital Allowance and has only recently changed.

In case you have forgotten, Capital allowance is the tax relief that is used by the revenue to replace the accounting expense of depreciation of the asset.

The only issue with it is that the Capital Allowance rates vary depending on the plant and expenditure.

There are 3 main categories for the rates used in claiming Capital Allowance Tax Relief

1) The Annual Investment Allowance:

Previously, businesses could claim 100% tax relief on the cost of the qualifying plant and machinery.

With the Super deduction, business owners can now claim 130% of the cost of the plant and machinery.

This means that the Super Deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest in plant and machinery.

However, this must be claimed in the first year of purchasing these items.

2) The First-year allowance

The first-year allowance rate can be applied to any Plant or Machinery that is either environmentally friendly or beneficial to technology.

The capital allowance tax relief rate for the First Year allowance is at 100%. 

3) Special Rate pooled items allowance :

The Special Rate Pooled allowance is for parts of a building referred to as integral features, items with long life, or a car with CO2 emissions over a certain threshold.

An Example of such integral features in a building includes:

• Lifts
• Escalators
• Water heating systems
• Air conditioning systems 
• Coldwater systems.

Formally, the rate that was deductible was by Special Rate Pooled Allowance was  6% in a tax year. However, with the super deduction, a business can claim up to 50% of the cost of the asset.

Additional Information on this tax Relief

To enjoy this relief, the business must claim the 130% allowance on qualifying capital assets bought into the business between the 1st of April 2021 until the end of March 2023.

Conclusion

If you would like us to support you with claiming the super deduction or support with your accounting work, kindly contact us or book a consultation appointment by clicking here