04 Mar 2021 7:23 AM

The Super Deduction, a new tax relief aimed at encouraging companies to invest, was announced in yesterday’s Budget by the Chancellor.  The Super Deduction provides for relief above cost on capital assets purchased instead of the usual 18% writing down allowance they would have received.

So how does it work?

It works alongside the Annual Investment Allowance which provides 100% tax relief on up to £1m worth of expenditure on plant and machinery but instead provides 130% tax relief to eligible companies on their qualifying asset purchases in the period from 1 April 2021 to 31 March 2023.

The same eligibility criteria applies for the money spent, but it also cannot be used for secondhand items and cannot relate to a ring-fenced trade. It also only applies to main pool expenditure.

What about special rate pool costs?

In addition to the Super Deduction for main pool expenses, the Budget brought in a temporary first year allowance for special rate costs also for the period from 1 April 2021 through to 31 March 2023.

This provides for tax relief for 50% of the costs incurred, which would have otherwise ordinarily been subject to a 6% writing down allowance.

Annual Investment Allowance

The Chancellor also announced that the Annual Investment Allowance, currently with a temporary increased limit set at £1m, would be extended so that the allowance would continue at that limit for the period from 1 January 2021 through to 31 December 2021.

As with all tax reliefs, careful planning and timing will be critical to ensure you maximise the benefit. If you have any questions please contact our specialist team.


Click here to read or download Alliotts' summary of the key points from the 2021 Budget