HMRC Issue Detailed Guidance on the Super-Deduction for New Equipment

Finance Act 2021 legislated for the temporary 130% super-deduction for companies acquiring new plant and machinery announced in the Spring 2021 Budget. This applies where the expenditure is incurred between 1 April 2021 and 31 March 2023.

This means that a new machine that cost £100,000 will reduce the company’s profits for corporation tax purposes by £130,000, saving £24,700 in corporation tax (at 19%). However, there is a clawback charge when the specific asset is disposed of as it needs to be separately identified and not pooled.

The 130% allowance is available where the equipment would normally be included in the general plant and machinery pool. Where the equipment would normally be included in the special rate pool, typically integral features such as air conditioning units, then a 50% allowance is available.

The HMRC guidance sets out detailed conditions for claiming the new tax relief and clarifies that the super-deduction does not apply to motor cars and leasing business among other exclusions.

Where equipment such as lifts, heating systems and air conditioning is installed in a building that is rented out the leasing restriction does not apply.

Note also that there is the 100% Annual Investment Allowance for up to £1 million of expenditure per annum. This was due to revert to just £200,000 from 1 January 2022 but was extended to 31 March 2023 in the Autumn 2021 Budget.

See:  https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23161