Over the past two years, limited companies have been able to claim an advantageous Capital Allowance on qualifying assets, providing tax relief of up to 130%. This super deduction, as it is known, will soon be withdrawn, however. It is only available on qualifying expenditure incurred on or between 1 April 2021 and 31 March 2023.
Broadly speaking, to qualify for the 130% deduction, the expenditure must:
- Be on new and unused plant or machinery – second-hand purchases will not qualify!
- Not be within the general exclusions list.
- Not be special-rate expenditure (although a 50% deduction may apply).
Exclusions include:
- Anything bought in the period in which the company ceases trading.
- Cars, including electric vehicles – however, commercial vehicles such as vans can qualify.
- Assets purchased for the purpose of leasing to customers.
- Most long-life assets.
The 50% deduction may apply where assets fall within the special-rate pool and written-down allowances would be given at 6%, an example of which would be integral features.
There are additional rules relating to when the asset has been bought, when the accounting period of the company straddles the end date of the allowance of 31 March 2023 and if the asset were to be sold, so you would need to ensure that these are factored in when determining if the super deduction is the right allowance to claim.
Now is the time to review your assets to ensure you make full use of this generous super deduction allowance.
Please get in touch with our Tax Advisory team should you need further assistance with this topic.