Tax relief at 130% vs 50% – the difference between the Super Deduction and First Year Allowance

Super Deduction

Now is the time for companies to consider their asset purchases and make the most of the Super Deduction and First Year Allowances (FYA) before they disappear on 31 March 2023.

Budget 2021 introduced the Super Deduction worth up to 130% on qualifying asset expenditure, i.e. assets which would qualify as main rate pool additions written down at 18%. The Super Deduction is only available for companies.

The 50% FYA is available for items ordinarily qualifying as special rate pool additions which are written down by 6% each year.

What items qualify for the 130% Super Deduction?

The list is not exhaustive but must be new plant and machinery and assets bought by the company in the qualifying period. This includes:

  • Computers, printers, laptops
  • Fixtures such as shelving, items that can be moved
  • Tools, drills, cranes, ladders and similar
  • Office furniture such as desks, chairs, monitors, cabinets, lockers, screens, hand sanitising stations
  • Machinery
  • Tractors, lorries, vans
  • Cars emitting not more than 50G/km CO2
  • Costs of demolishing plant & machinery
  • Fitted kitchen and bathroom suites

What qualifies for the 50% First Year Allowance?

Generally, this allowance covers long-life assets and integral features and includes items such as:

  • Lifts, escalators and moving walkways
  • Space and water heating systems
  • Air conditioning and air-cooling systems
  • Hot and cold-water systems
  • Electrical and lighting systems
  • External solar shading

There is no expenditure cap on either the Super Deduction of FYA and tax relief is taking in the corporation tax computation. Any trading loss can be carried back up to 3 years against profits under the temporary extension to the loss relief rules.

Buildings do not qualify for either of these allowances and may qualify for structural building allowances.

How Curo can help optimise the tax position

We can guide and advise you over maximising all available tax reliefs whilst fulfilling the business plan. Please contact [email protected] or call 01527 558539 for more information.