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SUPER DEDUCTION ALLOWANCE HMRC
The government is determined to encourage UK businesses to start investing as soon as possible by offering sizeable, time-limited enhanced tax reliefs for expenditure on eligible assets. Tax relief refers to a reduction in the amount of taxes that a person or business is required to pay. Tax relief can come in many forms, including deductions, credits, and exemptions. These reliefs can be applied to income taxes, sales taxes, property taxes, and other types of taxes.
The super-deduction allowance is the most attractive tax deduction for business investment the UK government has ever offered. Read on to find out everything you need to know about the HMRC super deduction allowance.
What is Super Deduction?
The Super Deduction is a tax allowance that was introduced in the UK in April 2021 as part of the government's plan to stimulate economic growth in the wake of the COVID-19 pandemic. The allowance allows companies to claim 130% tax relief on investments in qualifying plant and machinery assets. This means that for every £1 invested in qualifying assets, a company's taxable profits will be reduced by £1.30. The allowance is available for a limited period until April 2023.
What qualifies for Super deduction UK?
In the UK, the Super Deduction applies to investments in qualifying plant and machinery assets. This includes most types of tangible assets, such as machinery, equipment, and vehicles that are used in a business, as well as certain types of essential features, such as electrical systems and cold storage facilities.
To qualify for the Super Deduction, the asset must be new and be first used or installed, ready for use, in the UK between April 1, 2021, and March 31, 2023.
It's important to note that certain assets are excluded from the Super Deduction such as:
● Land and buildings
● Cars with CO2 emissions above 110g/km
● Assets used for long-term residential or commercial rental purposes
● Assets that are leased out
● Second-hand assets
We recommend that you consult with a tax advisor for more detailed information about the eligibility of your assets for the super deduction and the best way to claim super deduction.
What are the benefits of Super Deduction allowance HMRC?
The Super Deduction allowance introduced by the HMRC has several benefits for companies:
● Increased investment: The allowance is intended to encourage companies to invest in new plant and machinery assets, which can help them increase productivity, improve competitiveness, and create jobs.
● Lower tax bill: The 130% tax relief available through the Super Deduction means that companies can reduce their taxable profits by an additional 30% on top of the 100% relief they would normally receive for capital expenditure.
● Simplified tax calculations: The Super Deduction is intended to simplify the process of claiming relief for capital expenditure, as it eliminates the need for companies to calculate and claim relief separately for different types of assets.
● Boost economic growth: By encouraging companies to invest in new equipment and technology, the Super Deduction can help to stimulate economic growth, particularly in industries that have been impacted by the COVID-19 pandemic.
● Support for small businesses: The Super Deduction is intended to benefit small and medium-sized businesses and support them in navigating the challenges posed by COVID-19 and invest in their growth.
Who can claim Super Deduction allowance HMRC?
The Super Deduction allowance can only be claimed by companies that are subject to Corporation Tax in the UK.
Super Deduction allowance can be claimed by the following:
● Limited companies
● Partnerships with a corporate partner
● Unincorporated associations
● Collective investment schemes
● Certain open-ended investment companies
Note: Although the Super Deduction is not available to individuals or self-employed individuals, they may be eligible for the Annual Investment Allowance (AIA), which provides similar benefits for small businesses. Also, companies that are not based in the UK but have a permanent establishment in the UK may be eligible for the super deduction if they meet the other qualifying criteria.
To check your eligibility for super deduction allowance, contact us.
To maximize the available opportunities for tax relief, it is essential to take into account all capital expenditure incentives at once. Our team of tax planning experts gets to know every aspect of your company and is vigilant in recognizing and forecasting opportunities for tax relief, making sure capital allowances are claimed at the right time.