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Company Super Deduction Allowance 130%

What is it?

• It is a 130% first year allowance deduction for expenditure incurred in purchasing plant & machinery that would normally qualify for a main rate writing down allowance of 18%.

When can you claim it?

• You can claim it for expenditure incurred on or after 1st April 2021 up to and including 31st March 2023.

When is the expenditure deemed to be incurred?

• The general rule is that an amount of capital expenditure is to be treated as incurred as soon as there is an unconditional obligation to pay it.

What constitutes qualifying P&M?

• What is allowed are assets which would normally attract the writing down allowance of 18% or historically the 100% Annual Investment Allowance. Possible examples include;
o electric cars,
o cars with Co2 emissions below 51g/km,
o electric vehicle charging points,
o zero emissions goods vehicles, or
o new plant, machinery or equipment acquired by a Small and Medium sized Company.

What does not qualify?

• Second-hand assets.
• Cars other than those stated above.
• Long life asset expenditure.
• Connected party transactions. • The expenditure incurred on the plant or machinery which will be leased out. • Any expenditure incurred on an asset which would attract the special rate writing down allowance of 6%.

Things worth noting
• Do not buy any assets prior to 1st April 2021
• If the asset is deemed to have been disposed of (e.g. sold, destroyed and insurance monies received, no longer used in the trade etc.) then a balancing tax charge could arise on disposal.
• If the asset is deemed to have been disposed of anytime up to and including 31st March 2023, then the disposal value to be used would be increased by a further 30% which could increase the tax due.
o Planning point – where feasible defer the disposal until after 31st March 2023 if possible.
• If accounting year in which the expenditure is incurred straddles the 31st March 2023, then the Super Deduction Allowance is apportioned.
o Planning point – perhaps consider changing the year end to before 1st April 2023.