The new ‘super deduction’ announced in the recent Budget has certainly got everyone talking. Hailed as a measure to boost investment and productivity throughout the UK in the post-Covid landscape, what does this wonder product actually mean for business?

The super deduction is essentially an enhancement to the existing tax relief already available through capital allowances claimed on new qualifying plant and machinery.
The super deduction takes the form of:

·         A 130% first-year allowance on capital expenditure which would normally be eligible for 18% writing down allowances

OR

·         A 50% first-year allowance on capital expenditure which would normally be eligible for 8% WDAs

One key difference to note here is that, unlike the current annual investment allowance (AIA), the super deduction is uncapped.

So far, so good. However, the small print as always reveals more detail, and in this case, indicates that the much-heralded relief may be less beneficial than hoped.

·         Purchases made from 1 April 2021 onwards but prior to 1 April 2023 will qualify for the super deduction, provided the taxpayer has not entered into the contract to purchase the asset before 31 March 2021.

·         The new relief is only available to incorporated companies, and only for new plant and machinery, not second-hand equipment.

The main result of the above conditions is that claims cannot be made on assets purchased as part of a property transaction, unless the property is acquired brand new and directly from the developer.
Furthermore, special rate pool assets will only receive the lower deduction of 50%.

More information available on this link https://www.gov.uk/guidance/super-deduction