Super-Deduction: Tax savings on plant and machinery

In a bid to encourage businesses to invest in productivity-enhancing plant and machinery assets, the government has introduced super-deduction.

First announced in the March 2021 Budget and then the Finance Act 2021 in June, the super-deduction came into effect on 1 April 2021 and will run until 31 March 2023.

What is super-deduction?

Under the scheme, corporation tax payers will be able to claim a 130% capital allowance on expenditure qualifying as plant and machinery in what’s referenced as the ‘Main Pool.’ Alternatively, there’s also a 50% special rate allowance for asset expenditure allocated to the ‘Special Rate Pool’. This applies to integral features, thermal insulation and lifelong assets.

With regards to tax savings, the super-deduction means that companies will be able to cut their tax bill by up to 25p for every £1 they invest in plant and machinery.

Important update to super-deduction

Initially, these allowances weren’t available to property investors due to wide-ranging restrictions on leasing activities. Following sustained lobbying from the property sector, the government has backtracked and will now allow qualifying expenditure in leased buildings to qualify for these accelerated allowances.

For further information about the super-deduction, please don’t hesitate to get in touch with PKB or head to the gov.uk website where you will find a fact sheet containing everything you need to know.