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Spring Budget 2021_businesses
Read time: 4 minutes
Last updated: 3 Mar 2021
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Spring Budget 2021: The super-deduction - Enhanced temporary tax reliefs on qualifying plant and machinery for companies

For companies incurring qualifying plant and machinery spend between 1 April 2021 and 31 March 2023, a super-deduction of 130% will be available as a first-year allowance on assets normally attracting 18% and 50% for special rate assets normally attracting 6% allowances.

The super-deduction applies to companies eligible to claim capital allowances on plant and machinery (P&M).  Contracts must be entered into on or after 3 March 2021 and the expenditure incurred between 1 April 2021 and 31 March 2023.  Pre 3 March 2021 contracts are excluded, even if the expenditure is incurred after 1 April 2021. 

The company must be within the charge to Corporation Tax, and the P&M must be new and not second-hand. The normal exclusions in relation to cars, assets for leasing, ships, connected party transactions, and the standard anti-avoidance provisions apply. There are special rules for the oil and gas sector.  

For 130% rate assets, disposal proceeds will be taxed as a balancing charge in the disposal period and not deducted from the capital allowances pool.  For disposals before 1 April 2023, the balancing charge will be based on 130% of the proceeds. For disposals in a period straddling 1 April 2023, the proceeds are time apportioned, and the 130% applied to the pre 1 April period. 

For assets constructed over a period of time and partly qualifying for 130% allowances and partly under the normal rules, the proceeds are apportioned.

Disposals of 50% assets are dealt with by way of a balancing charge and apportionment, but there is no uplift. 

There is the usual raft of anti-avoidance provisions in the draft legislation.

About the author

Rhona Neil

+44 (0)20 7556 1377
neilr@buzzacott.co.uk
LinkedIn

The super-deduction applies to companies eligible to claim capital allowances on plant and machinery (P&M).  Contracts must be entered into on or after 3 March 2021 and the expenditure incurred between 1 April 2021 and 31 March 2023.  Pre 3 March 2021 contracts are excluded, even if the expenditure is incurred after 1 April 2021. 

The company must be within the charge to Corporation Tax, and the P&M must be new and not second-hand. The normal exclusions in relation to cars, assets for leasing, ships, connected party transactions, and the standard anti-avoidance provisions apply. There are special rules for the oil and gas sector.  

For 130% rate assets, disposal proceeds will be taxed as a balancing charge in the disposal period and not deducted from the capital allowances pool.  For disposals before 1 April 2023, the balancing charge will be based on 130% of the proceeds. For disposals in a period straddling 1 April 2023, the proceeds are time apportioned, and the 130% applied to the pre 1 April period. 

For assets constructed over a period of time and partly qualifying for 130% allowances and partly under the normal rules, the proceeds are apportioned.

Disposals of 50% assets are dealt with by way of a balancing charge and apportionment, but there is no uplift. 

There is the usual raft of anti-avoidance provisions in the draft legislation.

Have an enquiry about what the Budget means for you?

If you wish to understand whether your business would be eligible to access the new enhanced tax relief on P&M expenditure, please do not hesitate to reach out to contact one of our experts.

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