HomeFinanceWhat are Super Deduction Capital Allowances?

What are Super Deduction Capital Allowances?

Are you tired of navigating through a maze of tax regulations and deductions? Well, we’ve got exciting news for business owners like you! Introducing the game-changer in capital allowances – Super Deduction Capital Allowances. This revolutionary policy is set to shake up the world of taxation, offering incredible incentives that will leave your competitors green with envy. In this blog post, we’ll delve into the nitty-gritty details of what Super Deduction Capital Allowances are all about and how they can supercharge your company’s growth.

What are Super Deduction Capital Allowances?

What are Super Deduction Capital Allowances

Super deduction capital allowances are a new type of tax relief that was introduced in the 2021 Budget. They allow businesses to claim a 130% first-year allowance on qualifying investments in plant and machinery made between 1 April 2021 and 31 March 2023. This means that for every £1 invested, businesses can deduct £1.30 from their taxable profits.

The super deduction encourages businesses to invest and help boost economic growth during the coronavirus pandemic. The government has estimated that the measure will cost £25 billion and lead to an extra £100 billion of investment over the next two years.

Qualifying investments include:

  • New plant and machinery: This includes items such as tools, machinery, equipment, vehicles, office furniture and industrial premises.
  • Second-hand plant and machinery: This must be acquired after 1 April 2021 and used by the business for the first time. Another business or person can’t have previously used it within the same group of companies.
  • Integral features of buildings: This includes items such as lifts, escalators, air conditioning and heating systems, solar panels and water treatment plants.

What are the Benefits of Super Deduction?

When it comes to business tax relief, the government’s new super deduction is one of the most talked-about measures in recent years. From April 2021 until March 2023, businesses will be able to claim 130% of their qualifying capital expenditure against their taxable profits. This means that for every £1 spent on qualifying plant and machinery, they can reduce their tax bill by up to £1.30.

This deduction is in addition to the existing 100% first-year allowance for plant and machinery, which will continue to apply during the super deduction period. So, if you’re thinking of investing in new equipment or premises, now could be a great time to do it.

Of course, any tax saving is welcome, but the super deduction has other benefits that make it even more attractive. Here are three reasons why your business should take advantage of this scheme:

It could help you invest in growth: The super deduction is designed to encourage businesses to invest in plants and machinery that will support growth. By making it more advantageous to do so, the government hopes that businesses will use the relief to invest in expansion and job creation.

It’s a great time to buy new equipment: With many businesses still feeling the effects of COVID-19, the super deduction provides a much-needed boost at a time when many firms are looking to invest in new equipment. By taking advantage of the scheme, you could save money on your investment while also upgrading your business.

It could make you more competitive: The super deduction could help level the playing field between large and small businesses. Allowing smaller firms to invest in new equipment gives them a chance to compete with larger organisations that may have more capital at their disposal. This could be particularly beneficial for businesses in sectors like manufacturing, where having the right tools can make all the difference.

Eligibility Requirements for Super Deduction

Eligibility Requirements for Super Deduction

The UK government introduced the Super Deduction scheme in the 2021 budget as a temporary measure to encourage investment by businesses. The scheme allows companies to claim a 130% tax deduction on qualifying plant and machinery investments.

Here are the eligibility requirements for the Super Deduction scheme in the UK:

  • Applicable to Companies: The Super Deduction scheme is available to companies liable for corporation tax in the UK. It does not apply to individuals or partnerships.
  • Qualifying Expenditure: The scheme applies to qualifying expenditure on new, unused plant and machinery purchased between 1 April 2021 and 31 March 2023. The assets must be used primarily for the purposes of the company’s trade.
  • Purchase or Contractual Commitment: To be eligible for the Super Deduction scheme, you need to have either purchased the qualifying assets outright or entered into a contract for them before 1 April 2023. Simply placing an order or making an initial payment does not count as a contractual commitment.
  • First Use: The assets must be new and unused. The Super Deduction does not apply to second-hand or used equipment.
  • Qualifying Assets: The scheme covers a wide range of plant and machinery, including but not limited to computer equipment, office furniture, commercial vehicles, manufacturing equipment, and certain fixtures and fittings.
  • Exclusions: There are some exclusions to the scheme, such as assets leased out, structures and buildings, land, cars, and assets used for residential leasing or non-business purposes.
  • Temporary Measure: The Super Deduction scheme is temporary and only applies to assets acquired during the specified period. After 31 March 2023, the scheme is no longer available.

It is always advisable to consult with a tax professional or accountant to ensure that your specific circumstances and investments meet the eligibility requirements for the Super Deduction scheme. They will be able to provide personalised advice based on your company’s situation.

How to Claim Super Deduction Capital Allowances?

Assuming your business is eligible, claiming the super deduction is relatively straightforward. The main thing to remember is that you must keep accurate records of all qualifying expenditures.

Simply include the relevant expenses in your company’s tax return to claim the super deduction. HMRC has published guidance on what qualifies for the super deduction, and this can be found here.

How to Calculate and Record Capital Allowances?

super deduction capital allowances

To calculate and record capital allowances, businesses must first determine the value of their qualifying plant and machinery assets. This can be done by depreciating the asset’s historical cost over its expected useful life. To qualify for the super deduction, businesses must then reduce the value of their qualifying assets by an additional 50%. The resulting figure is the amount of capital allowance that can be claimed.

Businesses can claim capital allowances on a quarterly or annual basis. To do so, they must submit a claim form to HMRC along with supporting documentation.

Examples of Super Deduction Claims

There are a number of different types of expenditure that can be claimed under the super deduction.

These include:

  • Plant and machinery: This includes items such as production line machinery, factory equipment, and office furniture.
  • Buildings: If you’ve incurred expenditure on constructing or refurbishing a commercial building, you may be able to claim a super deduction.
  • Vehicles: A number of different types of vehicles, from cars to vans and lorries, qualify for the super deduction.
  • Energy efficiency: You may be able to claim a deduction for expenditure on energy-efficient plant and machinery, such as LED lighting or solar panels.


In summary, the Super Deduction Capital Allowances greatly incentivise businesses to invest in new plants and machinery. It allows them to reduce their tax liability while also providing access to up-to-date technology that can help them increase productivity and efficiency. With this incentive, businesses are able to stimulate the economy by increasing investment in capital assets and creating more jobs. This ultimately helps create economic growth across all sectors of society.


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