Super-deduction tax relief is coming to an end
As part of the 2021 Budget the chancellor of the exchequer introduced a new relief in the UK called the Super-deduction. This relief was introduced by the treasury to stimulate business investment, which in turn would promote economic growth.
The Super-deduction provides 130% first year allowance for expenditure incurred on new and unused qualifying plant and machinery, and a 50% first year allowance on qualifying special rate integral features.
The accelerated tax relief is due to come to an end on 31 March 2023, so this is your last chance to make use of the government incentive before the relief is withdrawn.
Here’s what you need to know:
The relief is available for companies who are within the charge to UK corporation tax
Cars and other standard exclusions apply in accordance with s.46 CAA 2001
Applicable for capital expenditure where the contract has been entered into on or after 3 March 2021 *and* incurred after 1 April 2021
The company must *own* the asset and it cannot have been acquired from a connected party
Any financing arrangements will need to be considered in detail – as depending on when the payments are due to be made, this could have an impact on whether you are deemed to be the owner of the asset and therefore eligible to claim
How do we claim before the deadline?
The technical entitlement and complexities of the HMRC tax legislation will need to be considered in detail by a capital allowances specialist before a claim is made. A specialist can identify what expenditure will qualify for the relief and whether the business meets the specific criteria.
For companies with a 31 March year end, the claim process will be relatively straightforward. Super-deduction can be claimed on qualifying expenditure in the year ended 31 March 2023. Thereafter, AIA would be available (subject to standard criteria) on qualifying expenditure up to the annual limit (currently set at £1m) securing Corporation Tax relief at a rate of 25%* in the year ended 31 March 2024 onwards.
Companies that have a year-end other than 31 March, will need to apply the transitional rules (as per Section 11 Finance Act 2021) to pro-rate the 30% uplift, based on the number of days in the company’s accounting period that are before 1 April 2023 (known as the ‘relevant percentage’). This will reflect the fact that the company’s taxable profits are in an accounting period straddling 31 March 2023, and as such the relief will be pro-rated between the old and new Corporation Tax rates.
How we can help
MJS has a specialist dedicated team made up of Chartered RICS Surveyors and Tax professionals who have years of experience in preparing capital allowances claims. If you would like to explore this further and to see how we could help to support you in optimising this tax relief, please contact Phoebe at – phoebe@mjs.tax or call 07961 580250.
