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Corporation Tax - 130% Super Deduction

From 1 April 2021, the government have introduced a temporary 130% super deduction for companies investing in qualifying new plant and machinery assets.  This applies to limited companies only, not sole traders and partnerships.  The scheme runs from 1 April 2021 to 31 March 2023. 

Any asset additions that qualify during this period are enhanced for tax purposes by 30% of the cost. So, if a new van/piece of equipment was purchased for £30,000, during the qualifying period, the £30,000 becomes £39,000 as a super deduction.  So total tax saved on a £30,000 qualifying purchase is £7,410 (19% tax rate applies).


A couple of important points to bear in mind though –


  1. if any assets that qualify for the 130% super deduction are then sold before 31 March 2023, the sale price has to be enhanced by 30% for capital allowance purposes.  So if the client in the example above sold the van for £15,000 in February 2023, then the disposal proceeds would become £19,500 for tax purposes.


  1. After 1 April 2023 the 30% uplift on the asset disposal proceeds does not apply, even if the asset qualified for the super deduction when it was purchased.


  1. The deduction only applies to purchases of brand new items of plant and machinery additions, vans etc.  The deduction does not apply to second hand assets, or for cars, or integral features.


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