UK Budget 2021 - “super-deduction” for plant and machinery

Mar 08, 2021

The Chancellor announced that from 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130 percent first-year capital allowance. More details of the measure together with draft legislation are available.

Investing companies will also benefit from a 50 percent first-year allowance for qualifying special rate (including long life) assets which can include integral features (such as those integral to a building).

This relief will not be available to unincorporated businesses; however such businesses can still take advantage of the extension of the £1 million annual investment allowance limit announced in November 2020 which will remain at this level until the end of 2021 (the limit was due to fall back to £200,000 from 1 January 2021).

The policy paper sets out that there will be exclusions for used and second-hand assets and expenditures on contracts entered into prior to 3 March 2021 even if expenditures are incurred after 1 April 2021. Plant and machinery expenditure which is incurred under a hire purchase or similar contract must meet additional conditions to qualify for the super-deduction and special rate relief.

The rate of the super-deduction will require apportioning if an accounting period straddles 1 April 2023. The rate should be apportioned based on days falling prior to 1 April 2023 over the total days in the accounting period.