The Chancellor unveiled a so-called super deduction first year capital allowance of 130% in the recent budget.
This temporary break is available for new qualifying plant and machinery purchased by companies between 1 April 2021 and 31 March 2023.
This is the first time that the government has introduced a rate of capital allowances relief that exceeds 100%, with few exclusions in terms of the kinds of plant and machinery for which it can be used to make it an attractive measure.
In practical terms this means that if a company spends, say, £10,000 in eligible expenditure, they may claim a deduction against their taxable profits of £13,000. Since the rate of corporation tax is 19%, this is a potential tax saving of £2,470 (19% of £13,000) that would not otherwise have been available.
Whilst the capital allowances legislation does not define ‘plant’ or ‘machinery’, ‘apparatus’ such as dental chairs and other dental equipment, essential in order to practice dentistry, would be considered as plant and machinery for the purposes of the relief.
Given the limited lifespan of the tax break, companies should start planning now.