What is the 130% super deduction?

The Super deduction for capital allowances was introduced to encourage business’s to invest and grow post covid-19 pandemic.

How does it work?

For qualifying purchases of assets in your business you can claim capital allowance deductions of 130% of the cost of the asset. 

The claim is made when preparing your company CT600 tax return. Your accountant will be aware of this and will claim the 130% deduction on qualifying purchases.

For example, 

If you purchase a van for your business at a cost of £15,000. 
You can claim capital allowance deductions of £19,500 (130% of the original cost)

This £19,500 qualifies for capital allowances at 100%, which means the whole 130% is deductible against company profits.

So your total tax deduction is £19,500 x 19% = £3,705

This means that the actual net cost to you of the van after tax deductions is £11,295.

What types of assets qualify for the super deduction?

To qualify for the deduction assets must be new and unused assets that qualify as main pool expenditure.

This will include expenditure such as solar panels, tractors, lorries and vans, fire alarm systems, security systems, carpets, computer equipment and servers, office desks and furniture, refrigeration units and electric vehicle charging points.

Most assets qualifying as plant and machinery, which are used within the normal course of business we be eligible for the super deduction.

What this means for you?

It means that if you are planning on investing in plant and machinery it could be a good idea to consider pushing purchases forward to take advantage of the super deduction.

The deadline for purchases is 31st March so have a chat with your accountant and plan ahead!