Last call for big tax breaks: How businesses can maximize the 130% capital allowances super-deduction before 31 March 2023

To stimulate the economy post-Covid, HMRC introduced a ‘super deduction’ at 130% available on most new plant and machinery expenditure, incurred between 1 April 2021 to 31 March 2023, that would ordinarily qualify for writing down allowances at the main rate of 18%. Additionally, a new first year allowance of 50% was introduced for most new plant and machinery investments that would ordinarily qualify for 6% special rate (SR) writing down allowances. Additional conditions apply in certain circumstances.

Super-deduction’ includes all new plant and machinery, such as:

• tractors, lorries, vans
• electric vehicle charge points
• computer and IT equipment
• machinery used in the trade of the business.

SR allowance covers new plant and machinery that qualify for the 6% special rate pool, including integral features, such as:

• water pipes within a building
• an electrical system within a building
• solar panels.

It is worth noting that certain expenditure is excluded, for example, the purchase of company cars, as well as the purchase of second-hand plant and machinery.

The key points for companies wishing to make full use of the super-deduction to consider are as follows:

1. Can any projects be accelerated so that expenditure is incurred before 31 March?
2. Where contracts are in place and conditional on delivery, can manufacture and delivery be accelerated by suppliers to fall before the deadline?
3. Are the terms of any contracts currently being negotiated going to impact the availability of the company to claim the super-deduction?

For relevant expenditure in a period that straddles 1 April 2023, the super-deduction percentage is reduced from 130% to reflect the proportion, based on the number of days, of the period falling after 1 April 2023.  Therefore, depending on the accounting period end, spend after 2 April 2022 will attract a super-deduction of less than 130%.

Companies need to be aware of the anti-avoidance provisions that apply. These provisions include contrived arrangements, agreements with connected parties, and second-hand assets. Additionally, there is a clawback of the tax saving if your business disposes of the asset prior to 1 April 2023.

The Prydis Group are strategically placed to assist with any capital funding requirements your company may have. Our team of experts can guide you through the finance options available to your business based on your own specific circumstances. If you would like further information on how Prydis can assist with your Funding requirements, please contact us at 01392 432431 or kyleborland@prydis.com .

The timing of capital expenditure will determine the amount of relief due, the impact of this on any capital expenditure incurred can be extremely complex. For further information and tax planning, please contact Prydis Accounts at 01392 432431 or caragreen@prydis.com.