Deadline looms for companies to claim super-deduction tax relief

The super-deduction allowed companies to claim 130% of the cost of qualifying new plant and machinery against their taxable profits. It applied to expenditure incurred between 1 April 2021 and 31 March 2023. This was a substantial increase from the usual 18% writing down allowance for main rate assets. Additionally, a 50% first-year allowance was available for special rate assets, such as integral features of buildings.

The super-deduction was only a temporary measure, so the removal of the relief means that companies are unable to claim this enhanced relief on expenditure incurred after 31 March 2023. Initially, it was expected tax relief would revert to the previous capital allowances regime, which includes the Annual Investment Allowance (AIA) and writing down allowances.  This posed the risk of creating a cliff-edge type scenario. However, the introduction of full expensing and the extension of the 50% first-year allowance will continue to provide companies with a generous tax relief on their qualifying capital expenditure. Full expensing allows companies to deduct the entire cost of qualifying main rate assets in the year of purchase, while the 50% first-year allowance applies to special rate assets.

Companies need to be mindful of the timing of their capital expenditure. Investments made before 31 March 2023 qualify for the super-deduction, while those made after this date will fall under the full expensing regime. Companies that claimed the super-deduction must track these assets carefully. Disposal of these assets will result in a balancing charge, effectively clawing back a proportion of the benefit of the super-deduction. While the full expensing regime and the 50% first-year allowance will continue to provide significant tax benefits, the enhanced relief of the super-deduction will no longer be available, so companies should plan their future investments considering the change in tax relief options. 

For companies with a 31 March 2023 year end, the final deadline to make a claim for the super-deduction is 31 March 2025. 

The super-deduction has been a valuable tool for companies, encouraging investment and supporting economic recovery. As it comes to an end, companies must adapt to the new tax relief landscape, leveraging full expensing and other available allowances to continue driving growth and innovation.