What is the ‘super-deduction?’
The 130% ‘super-deduction’ was announced last year as an incentive to limited companies to invest in plant and machinery. For expenditure incurred on qualifying plant and machinery until the end of March 2023, this will attract 130% capital allowances. This means that the expenditure will reduce the corporation tax bill by up to 25p for every pound invested. There are calls for the relief to be extended but, unless something does change, this will end in March.
With the turbulence of last couple of years, some companies have shown a reluctance to invest.
What are qualifying plant and machinery purchases?
For the purposes of claiming the 130% ‘super-deduction’, many physical capital assets used in the course of a trade qualify as plant and machinery.
Machinery includes machines and the working parts of machines. A machine usually has moving parts. Assets like motor vehicles (but the super-deduction cannot be used for cars) and lathes are machines. Computers and similar electronic devices are also machinery.
The meaning of ‘plant’ can be more difficult but it is generally an ‘apparatus’ used for carrying on the business (sometimes referred to as a ‘tool of the trade’) and is kept for permanent use in the business. Please speak to us about what will qualify.
What are the exemptions?
An important fact to note is that to qualify the plant and machinery must be new (second hand assets do not qualify) and the asset cannot be for leasing.
A further point to note is that only companies paying corporation tax qualify for the relief. Sole traders and partnerships do not.
Some plant and machinery does not qualify for 130% relief but benefits from a 50% first-year allowance instead (rather than the usual 6% writing down allowance). These are what are known as ‘special rate assets’ being those with an expected economic life of more than 25 years or fixtures within a building.
Please speak to us
Adam, our managing director, specialises in limited company taxation so, if you want to know more about the ‘130% super-deduction’, he would love to hear from you. You can email him firstname.lastname@example.org or telephone him in 01756 799823.