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The Super Deduction Scheme 2021

What is the new super-deduction scheme and how does it work?

The super-deduction scheme offers ‘a new 130% first-year capital allowance for qualifying plant and machinery assets (c/w Variable Speed Drives, Electric Motors, Electrical Control Panels / Systems ; and a 50% first-year allowance for qualifying special rate assets’, according to HM Revenue & Customs (HMRC).

Our advice for businesses looking to maximise your tax savings is to plan well ahead and discuss any investment plants on Variable Speed Drives, Electrical Motors, Electrical Controls Panels and Systems with us at Quantum Controls in order to maximise your tax saving on these projects.

Follow Link for Government Official fact sheet – Super_deduction_factsheet.pdf (publishing.service.gov.uk)

What is the new super deduction?

‘Super deduction’ includes all new plant and machinery (c/w Variable Speed Drives, Electric Motors, Electrical Control Panels / Systems) that ordinarily qualifies for the 18% main pool rate of writing down allowances. ‘SR allowance’ covers new plant and machinery qualifying for the 6% special rate pool, including integral features in a building and long life assets.

Follow Link for Government Official fact sheet – Super_deduction_factsheet.pdf (publishing.service.gov.uk)

How does the new super deduction work?

The super-deduction allowance is the most attractive tax incentive for business investment ever offered by a British government. Your company can claim back up to 25p for every pound you invest in ‘qualifying’ machinery and equipment (c/w Variable Speed Drives, Electric Motors, Electrical Control Panels / Systems for two years from 1 April 2021.

Follow Link for Government Official fact sheet – Super_deduction_factsheet.pdf (publishing.service.gov.uk)

How does the super-deduction work?

The new tax relief is being introduced for two years for expenditure from 1 April 2021 to 31 March 2023 – sadly it’s only a temporary measure.

How does it work? Let’s look at the 130% first-year relief on qualifying main rate plant and machinery investments made during this period. Here’s an example:

Let’s say your business spends £100,000 on main rate equipment and you’re eligible to claim the super-deduction tax break on this expenditure.

When you calculate your taxable profits your corporate tax deduction will be £130,000 (i.e. 130% of your initial investment). Deducting £130,000 from your taxable profits will save your business up to 19% of that – 19% of £130,000 is £24,700. And that’s how much corporation tax you save if you qualify for super-deduction.

Bear in mind that this is a 130% deduction for investments that would normally qualify for 18% plant and machinery writing down allowances (or capital allowances). And the first-year allowance of 50% on special rate pool expenditure would normally only attract 6% writing down allowances.

Follow Link for Government Official fact sheet – Super_deduction_factsheet.pdf (publishing.service.gov.uk)