Super-Deduction Scheme: how it could help your business

by Michael Blaken

Published on 24th May 2021

The Super-Deduction Scheme was among the Government’s measures announced in the Budget to help businesses.

Super-Deduction-Scheme-benefits-businesses-investing-in-plant-and-machinery

Aimed at organisations investing in plant and machinery, the scheme was the Government’s response to the significant falloff in investment that has taken place since the start of the pandemic.

How does the super-deduction scheme work

From 1 April 2021 and until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

  • a 130% super-deduction capital allowance on qualifying plant and machinery investments
  • a 50% first-year allowance for qualifying special rate assets

The result is the super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest.

Businesses can also benefit from:

  • Annual Investment Allowance (AIA) providing 100% relief for plant and machinery investments up to £1m, until 31 December 2021
  • Within Freeport tax sites, companies can access new Enhanced Capital Allowances (ECA+) and companies, individuals and partnerships can benefit from an increased level of Structures & Buildings Allowance (SBA+) for investments until 30 September 2026.

What qualifies as new plant

By no means an exhaustive list, commonly regarded as plant or machinery are:

  • Solar panels
  • Computer equipment and servers
  • Tractors, lorries, vans
  • Ladders, drills, cranes
  • Office chairs and desks
  • Electric vehicle charge points
  • Refrigeration units
  • Compressors
  • Foundry equipment

Example of Super-Deduction Scheme in practice:

A company incurring £1m of qualifying expenditure decides to claim the super-deduction. Spending £1m on qualifying investments will mean the company can deduct £1.3m (130% of the initial investment) in computing its taxable profits. Deducting £1.3m from taxable profits will save the company up to 19% of that – or £247,000 – on its corporation tax bill.

If you are planning to invest in plant or machinery and want more information or advice on how to take advantage of the Super-Deduction Scheme, please get in touch with the accountancy team at Optimum.

We help business owners in Swindon, Wiltshire, Cheltenham, Gloucestershire and the surrounding areas.

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