Capital allowances super-deduction

The measure

The government has announced a new 130% first year capital allowance for qualifying plant and machinery assets (increased from the ordinary 18% annual rate) and a 50% first-year allowance for qualifying special rate assets (increased from the ordinary 6% annual rate).  


Who will be affected?

Companies incurring capital expenditure on plant and machinery assets. 


When will the measure come into effect?

The measure will come into effect from 1 April 2021 until 31 March 2023 in respect of plant and machinery expenditure incurred under contracts entered into on or after 3 March 2021. 

Our view

This measure represents a generous incentive by government to motivate companies to invest in their businesses. It is geared towards encouraging action now by limiting the window of opportunity to two years. In the context of the subsequent increase in the main rate of corporation tax to 25% and the additional opportunity announced for carrying back losses up to 3 years, plant and machinery allowances become an increasingly valuable relief against taxable profits.