Discovery Call Coronavirus Update

Super-Deduction

Posted by Jon Wood
Last updated 13th August 2021
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  • Ok, so what's so super about it?

    From 1  April 2021 to 31 March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments. This so called ‘super-deduction’, which is designed to stimulate business investment, trumps the now long-standing default 100% annual investment allowance most small companies can claim on all plant and machinery investments.

  • And what is plant and machinery anyway?

    What is plant and machinery – to many business owners, particular those working in professional services this may seem like an archaic term, but essentially it boils down to actual physical stuff required for carrying on their business – sometimes known as tools of the trade. one thing It is certainly not is stock in trade. For us accountants this may include a laptop including the case and the mouse, a calculator and the humble filing cabinet. The builder will likely have a van, his or her tools and the essential tape measure. All can be considered plant and machinery and hence you can claim the super-deduction.

  • Ok, so it's a 130% allowance, that sounds impressive but in reality, what does it mean?

    The actual ‘saving’ comes in at 5.7%. So if you invested in a £1,500 laptop last year, you would reduce your tax bill by £285, whereas the equivalent ‘super’ reduction from the super deduction would be  £370.50. So the difference, that being £85.50, is actually 5.7% of the original purchase price.
  • How the devil should I account for this.
    This is not set in stone. But at Laxmi we suggest that all plant & machinery is recorded as a fixed asset and registered as such. The choice is then to add the item to the regular depreciation cycle or depreciate in full in the month of purchase. At Laxmi we are Xero evangelists and given the right training we can help ensure you take the right approach on the capturing the super-deduction.
  • Need help with your accounts? we are waiting to hear from you
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