A new ‘super deduction’ first-year allowance (SDFYA) of 130% will be given to Limited Companies
It will be given for expenditure on new and unused qualifying plant and machinery, acquired between 1 April 2021 and 31 March 2023.
Accordingly, capital allowances on eligible expenditure of £100,000 will be worth £130,000. The effective corporation tax saving will be £130,000 @ 19% = £24,700.
However, when this plant is sold, there will be, in most cases a clawback of all (or the majority) of the allowances previously given.
The SDFYA gives relief at 130% of the new qualifying expenditure incurred. This would include new lorries and vans. It must be noted that only new and unused asset expenditure qualifies for this 130% SDFYA.
The following expenditure will not qualify:
- Cars
- Electric cars
- Long-life assets
- assets leased out in the course of a letting or leasing business
- Integral features
The SDFYA is indeed only available to companies. Individuals i.e. sole traders and partnerships will not qualify for the SDFYA. They will have to continue to rely on the 100% Annual Investment Allowance (AIA).
Additionally, for companies, the 100% AIA remains in place as well and the AIA can be used to get tax relief for certain expenditures (e.g. second-hand assets) that do not qualify for the 130% SDFYA.
Companies, therefore, get two things…
- The 130% super deduction and
- The 100% AIA
The AIA limit has been extended to £1million up to 31 December 2021.
For Edwards of Gwynedd clients that have taken out our Annual Tax Planning Review we will discuss the SDFYA in detail with you; discuss what does and doesn’t qualify and advise you on how to maximise your claim however if you want further guidance you can read more by simply CLICKING HERE.
This information is subject to change and is not professional advice. Refer to our disclaimer for more details.
