Make the most of investment incentives before they come to an end

Rachael Tate

Rachael Tate

Tax Senior Manager

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 endRateSuper deduction available
April 2023335 days @ 130% =128%
May 2023304 days @ 130% =125%
June 2023274 days @ 130% = 123%
July 2023243 days @ 130% =120%
August 2023212 days @ 130% =117%
September 2023182 days @ 130% =115%
October 2023151 days @ 130% =112%
November 2023121 days @ 130% =110%
December 202390 days @ 130% =107%
January 202459 days @ 130% =105%
February 202431 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.