Plant and machinery investments: Last chance to boost tax relief
On 3 March 2021 the Chancellor announced two new temporary first year allowances – the ‘Super Deduction’ and the ‘Special Rate Allowance’. The allowances apply for capital investments made between 1 April 2021 and 31 March 2023.
Both these first year allowances gave businesses investing in qualifying equipment a much higher tax deduction in the tax year of purchase than would otherwise normally occur. They can be claimed alongside the ongoing Annual Investment Allowance (AIA) which already gives 100% relief for costs of qualifying plant and machinery in the tax year of purchase up to £1m.
There is a window of opportunity to maximise the capital allowances tax relief in relation to expenditure on plant and machinery incurred between 1 April 2021 and 31 March 2023.
Companies who invested in qualifying new plant and machinery assets, between the above dates, are able to claim:
• a Super Deduction first-year allowance of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing-down allowances
• a Special Rate Allowance first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing-down allowances.
Examples of main rate pool plant and machinery which may be eligible for the 130% Super Deduction include items such as:
• Machines e.g. computers/printers
• Office equipment and furniture e.g. desks/chairs
• Fire alarms and fire fighting equipment
• Carpets and loose floor coverings
• Security equipment
• Sanitaryware equipment
• Signage
The 50% Special Rate Allowance related to plant and machinery in the special rate pool commonly known as Integral Features and includes items such as:
• Air conditioning and ventilation equipment
• Building management systems
• Electrical systems including power supplies and lighting
• Cold water installations
• Passenger and goods lifts
• Solar shading
• Thermal insulation to an existing building
Claims for these first-year allowances must be made in the tax return for the period the expenditure was incurred. Companies have two years to file tax returns so you may still be able to claim on eligible expenditure incurred during 2022 and 2023.
The Super Deduction provisions have been replaced with Full Expensing allowing companies to claim a 100% capital allowance on qualifying main rate pool plant and machinery investments from 1 April 2023 to 31 March 2026.
The 50% Special Rate Allowance continues until 31 March 2026.
How can we help?
Now is the time to consider if you have claimed capital allowances correctly and maximised their value. If you would like to know more about the Super Deduction / Special Rate Deduction and how it may affect your business, please do not hesitate to contact us.