Budget 2021 introduced a new super deduction of 130% on qualifying capital expenditure incurred by companies between 1 April 2021 and 31 March 2023.

Qualifying expenditure includes plant, equipment and also fixtures within properties.

The Government’s intention is to encourage capital expenditure and stimulate spending. However, the benefits of the super deduction are not as straight forward as they initially appear.

Although enhanced tax relief is given on acquisition, a balancing charge will be calculated on the disposal of the asset. This will be based on the disposal proceeds, and will also be subject to a 130% enhancement.

Unfortunately, the budget also announced an increase in Corporation Tax rates from 2023 to 25% for profits over £250,000.

It may therefore be possible that if the asset were to be sold in the future, the benefits of the super deduction would be lost due to the crystallisation of the balancing change at a time when higher taxation rates have been introduced and the company would be better to claim capital allowances under the normal rules.

It will be interesting to see if the take-up of the super deduction is as high as has been forecast by HM Treasury, and if it results in the predicted increase corporation tax revenue in later tax years.

If you have any questions relating to the new super deduction – please get in touch with your usual Lambert Chapman contact and we will be happy to assist.


The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.

Lambert Chapman Chartered Accountants

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