This new super deduction allowance is only available to Limited Companies chargeable to corporation tax
What is it:-
The super deduction is a first year allowance available on expenditure by companies on plant and machinery. It has no limit and is available from 1st April 2021. It is for businesses who want to invest in assets for their business and allows companies to reduce corporation tax bills by reducing taxable net trading profits by 130% of the total cost of expenditure incurred. So for every £10K spent on assets, £13K can be deducted from the taxable profit before corporation tax is calculated.
The assets must be bought:-
- New and Unused
Also the expenditure must be between:-
- 01.04.21 – 31.03.23
This means that second hand goods do not qualify.
Annual Investment Allowance
However the Annual Investment Allowance is still available which is available to both companies and unincorporated businesses and allows 100% of the total cost of expenditure on any assets that are ‘new’ to the business (including second hand goods). This is capped at 1 million pounds until 31st December 2021 and then reduced to £200K on 1st January 2022. So for every £10K spent on assets, £10K can be deducted from the taxable profit before tax is calculated.
Expenditure on assets such as:-
- Computer Equipment
- Office Furniture
Qualify for both first year allowances.
For more information contact us.