Make the most of investment incentives before they come to an end
The 130% ‘super deduction’ Capital Allowances relief is coming to an end on 31 March 2023, which could affect the tax relief available on expenditure incurred by companies.
The super deduction allows companies incorporated businesses (not sole traders or partnerships) to cut their corporation tax bill by 25p for every £1 invested in qualifying plant and machinery. To qualify, expenditure must meet the definition of ‘plant and machinery' for capital allowance purposes – this covers new and unused assets and machinery, office equipment, vans, and lorries.
There are complex rules around the timing of capital expenditure and these, together with the transitional rules when the super-deduction ends, could have an impact on the availability of the full super-deduction rate of 130%. Where expenditure is in an accounting period that straddles the end of the qualifying period, ie 1 April 2023, the super-deduction rate will be time apportioned.
For companies with a March accounting year end, the super-deduction will be available in full on qualifying expenditure for the accounting year end to 31 March 2023.
However, where the accounting period ends after 1 April 2023, the available super-deduction will reduce to:
| Year end | Rate | Super deduction available |
|---|---|---|
| April 2023 | 335 days @ 130% = | 128% |
| May 2023 | 304 days @ 130% = | 125% |
| June 2023 | 274 days @ 130% = | 123% |
| July 2023 | 243 days @ 130% = | 120% |
| August 2023 | 212 days @ 130% = | 117% |
| September 2023 | 182 days @ 130% = | 115% |
| October 2023 | 151 days @ 130% = | 112% |
| November 2023 | 121 days @ 130% = | 110% |
| December 2023 | 90 days @ 130% = | 107% |
| January 2024 | 59 days @ 130% = | 105% |
| February 2024 | 31 days @ 130% = | 103% |
Annual Investment Allowance
The current £1million rate of the Annual Investment Allowance will remain at this level rather than reducing to £200,000 on 1 April 2023 as previously expected. The AIA allows businesses with spend qualifying for plant and machinery capital allowances to claim a 100% tax deduction in the year.
To make use of these valuable allowances and avoid any surprises, we would recommend planning your capital expenditure carefully and consulting with your advisers.
Get in touch
Our Rural team and specialist Construction & Property Incentives team can help you plan your expenditure to make use of these allowances and avoid surprises, so please get in touch if you have any queries.
