Editor | 12 April 2021
The New Super Deduction Explained

The New Super Deduction Explained

What is the super deduction?

Businesses can claim 130% first year relief on qualifying plant and machinery bought between 1st April 2021 and 31st March 2023.

Under the super deduction, for every pound a company invests, their taxes are cut by up to 25p.

The government announced this as part of the 2021 Budget in March, in the hope that the scheme will encourage business investment and stimulate economic growth.

The super deduction scheme is only available to Limited Companies.  Unfortunately sole traders cannot benefit.

To give an example of the available savings, if you spend £100,000, the corporation tax deduction will be £130,000. You will save 19% on £130,000, which is £24,700.

What is plant and machinery?

These are things that you buy and keep to use in the business.

Items that are classed as plant and machinery include:

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

What assets will not be included?

Items excluded as plant and machinery:

  • Mains water
  • Gas systems
  • Land
  • Buildings
  • Structures, e.g. bridges, roads, docks
  • Items for business entertainment e.g. a yacht or karaoke machine
  • Second-hand items do not qualify for the super deduction; the items must be new. The only exception to this rule would be buying a van that had been used as a demonstration model, as these can sometimes be considered new.

Assets on hire purchases do comply, as long as they are treated as being owned by the Limited Company who are making the payments. Assets paid for via a finance lease do not qualify for the relief.

Speak to the team today to understand if your potential new assets will be eligible.