The 2021 Spring Budget introduced two types of enhanced allowances for companies incurring capital expenditure from 1 April 2021 to 31 March 2023. But for organisations with a year-end other than 31 March 2023, expenditure will need to be incurred earlier than that in order to get the full 130% deduction.
What are the two types of allowances?
The Super-Deduction is an enhanced 130% first-year allowance for new plant and machinery expenditure that would have qualified for main rate allowances at 18% such as furniture, machines and computers; and
Special Rate Allowance
The Special Rate Allowance is a 50% first-year allowance for expenditure that would have qualified for the special rate pool allowances at 6%, such as electrics, lighting, heating and solar panels.
What are the criteria for meeting the enhanced allowances?
The relief is conditional on meeting the following points:
- Brand new, unused;
- The asset cannot be onward leased;
- Acquired after 1 April 2021 (and ordered after 3rd March 2021);
- Acquired before 31 March 2023; and
- Not a car
As we are entering into the final period during which a company can claim a super-deduction, one point to note is that the full super deduction rate of 130% is only available for accounting periods ending before 1 April 2023.
For accounting periods ending on 31 March 2023, the super-deduction will remain at 130% for qualifying expenditures incurred before the year-end.
However, for accounting periods ending after 1 April 2023 the rate of the first year allowance reduces depending on the number of days falling before and after 1 April 2023.
Time is running out to ensure any qualifying items are acquired by 31stMarch 2023
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If you would like further information on these areas please contact one of the team.