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Thu 29th Apr 2021: Super Deduction

Who qualifies under this scheme?


All companies that are subject to corporation tax (not individuals, partnerships or LLPs). 
 

What expenditure qualifies?


Super deduction includes all new plant and machinery that qualifies for the 18% main pool rate of writing down allowances. Cars do not qualify as they are subject to a separate capital allowance rate and similarly and second hand equipment purchases will also go into the writing down allowance pool as normal.
 

How does timing of the expenditure work?


The super deduction allows companies to offset 130% of the cost of the equipment against their corporation tax bill for that year.
 

How does the Super Deduction interact with the existing Annual Investment Allowance?

As shown in the table below the super deduction is more beneficial than claiming the AIA for a main pool asset purchases. It may however still be beneficial to claim the AIA in the first instance rather than the SR allowance on relevant assets, unless the total expenditure on special rate pool assets exceeds the AIA threshold of £1m.

The following table summarises the key points:

Asset type

Capital Allowance claim

Asset age

CA rate

Effective relief of cost in year 1 for company

Main plant and machinery

Super deduction

New

130%

24.7%

AIA (max £1m)

All

100%

19%

Main pool

Second hand

18%

3.42%

Special Rate (generally Long Life assets or integral features)

AIA (max £1m)

All

100%

19%

SR deduction

New

50%

9.5%