Is the super-deduction really that super?

On 1 April 2021 HMRC brought in a new Capital Allowance relief for a 2 year period that is labelled the “Super-deduction”.

This capital allowance for limited companies only, allows qualifying plant & machinery to gain 130% relief against taxable profits. The relief is only available up to 31 March 2023.

The assets which qualify for the 130% are computer equipment, tractors, lorries, vans, office equipment, tools this is not an exhaustive list – more information can be found at https://www.gov.uk/guidance/super-deduction.

The question is – are you better to get 130% tax relief from an asset costing for example £10,000 now?

Or get 100% tax relief for that asset in April 2023 when the corporation tax rates will increase to a maximum of 25%?

What we need to consider is that the corporation tax rates will increase from 19% on a sliding scale to 25% from taxable profits between £50,000 to £250,000. Profits less than £50,000 will remain to be taxed at 19%.

There is no hard & fast rule, but if company profits are likely to remain under £50,000 from 2023 onwards it makes sense to purchase the asset before 31 March 2023 to get the extra 30% tax relief.

However, the closer your profits will be to £250,000 it may be better to defer any large capital acquisitions to 2023-24 tax year.

If in doubt, ask your professional adviser who can look at YOUR specific circumstances & advise accordingly.