Super-deduction Capital Allowances Update

HMRC have issued a factsheet on the new temporary “super deductions allowance” and “special rate allowance” in respect of qualifying capital expenditure incurred during the period 1 April 2021 to 31 March 2023.

The main headline points regarding these two new allowances are noted below.

  • Available to companies only
  • The claimant company must be a UK resident trading entity subject UK corporation tax
  • Not available to property/investment businesses
  • The asset on which the relief is being claimed must be used in the UK trading activity
  • The level of qualifying expenditure is un-capped
  • Relief of 130% x qualifying cost for “main pool” assets
  • Relief of 50% x qualifying cost for “special rate pool” assets
  • Expenditure must be incurred during the period 1 April 2021 and 31 March 2023
  • Contracts entered into prior to 3 March 2021 will not qualify
  • Assets under hire purchase – may qualify if the contract allows the asset to become owned by the company on performance of the contract, and the qualifying asset is brought into use before the end of the accounting period
  • Rate of super deduction will be apportioned if the accounting period straddles 1 April 2023
  • The current Annual Investment allowance continues to be available (£1m until 31 December 2021, then reducing to £200k per annum), in addition to the new temporary deductions now introduced