Something Super

The super deduction tax relief scheme in the UK is coming to an end soon.

So, if you’re planning to upgrade your tools of the trade, now would be an excellent time to do so.

Read on to discover how the scheme works, who’s eligible, and how much you can claim…

What is the Super Deduction?

Announced by then-Chancellor Rishi Sunak back in the 2021 budget, the super deduction scheme was established to boost investment, productivity and efficiency for UK businesses – especially after the hardship of 2020.

The scheme offers companies the rare opportunity to claim 130% tax relief on new plant and machinery, purchased before 31st March 2023.

Put another way, for every £1 you spend, your taxes are cut by up to 25p.

So, how does it work?

The scheme allows you to claim 130% tax relief on assets purchased before 31st March 2023.

Let’s look at an example.

Let’s say you purchase new kit at a total cost of £100,000.

In that accounting year, you can claim 130% of that figure (i.e. £130,000) from your taxable profits.

Applying 19% corporation tax to that £130,000 figure gives you a tax saving of £24,700

The table below provides a comparison of the Super Deduction with the previous system – as you can see, the tax saving is more than doubled in this example.

Previous SystemSuper Deduction
A company spends £2m on qualifying assets

They deduct £1m using the AIA* in year 1, leaving £1m

They then deduct £180,000 using WDAs** at 18%

Total deductions in this example are therefore £1.18m

Apply Corporation Tax at 19%

Equals £224,000 in tax savings

Or 11p in every £1 spent
Same company spends £2m on qualifying assets

They deduct £2.6m using the 130% rate Super Deduction tax rate

Apply Corporation Tax at 19%

Equals £494,000 in tax savings

or 24.7p in every £1 spent

*AIA, Annual Investment Allowance, ended December 2021 **WDAs, Writing Down Allowances

What equipment is included?

HM Treasury defines ‘plant and machinery’ as tangible assets that you use in the course of your business – aka, the tools of your trade.

They do not provide an exhaustive list, but examples of these types of assets include;

  • Tools such as ladders and drills
  • Construction equipment such as excavators, compactors and bulldozers
  • Machines such as computers, printers, lathes and planers

In order to qualify, the kit you purchase must be;

  • New and unused
  • Purchased – not leased
  • Not a gift
  • Not to be purchased to lease to someone else

Of course, investing in new equipment isn’t just good for your tax affairs – it’s good for productivity too.

Just take a look at this recent customer success story from Walsh Steel Detailing – without their recent investment in an X7 laser scanner and a XR10 mixed reality headset, they ‘simply couldn’t do the work we are doing’ – keeping them one step ahead of the competition.

So, if you were looking to invest in some new kit, it’d be well worth making the investment before the 31st March deadline.
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Who's eligible?

There are some basic eligibility requirements to qualify for the scheme;

  • You incurred the expenditure before 1st April 2023
  • You must be a UK registered company, that is subject to corporation tax
  • You did not buy the plant or machinery due to a contract you entered into before 3rd March 2021

If you're a sole trader, you can't use the Super Deduction scheme, but there is a simpler scheme you can take advantage of - find out more about this scheme, here

What else do I need to know?

For more information on how the Super Deduction scheme works, take a look at the site on Super Deduction - via this link

All information on this page was correct at time of publication - 13 February 2023

Please note that the Super Deduction scheme is only available to UK companies - businesses should consult their professional tax adviser for full details of the scheme

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