With the temporary Super-Deduction set to end on 31st March 2023, it is worth making sure your company is entitled to claim it before doing so.

Points to note:

• Only companies can claim the Super-Deduction.
• Contracts entered into prior to 3rd March 2021 are not permitted.
• The Super-Deduction cannot be claimed in the final period where a company ceases to trade.
• Only equipment which is unused and not second-hand can be included within a claim.
• Cars do not qualify.
• Companies which use the equipment for leasing are excluded, but landlords are generally permitted.
• Connected party transactions are not permitted.
• Assets classified as special rate expenditure are excluded e.g. long life assets, integral features such as electrical systems.
• HP contracts are required to meet additional conditions in order to qualify.

Once you have confirmed that the nature of the business, the transaction and asset qualify, the next question to answer is whether the cost has been incurred on or after 1st April 2021 but before 1st April 2023. Incurred in this instance is when there is an unconditional obligation to pay the supplier.

It is also critical that the expenditure is incurred in the same accounting period as the ownership transfers. How you finance the acquisition and the contractual terms agreed will impact whether a Super-Deduction claim can be made.

Assets acquired using HP finance = the date of claim is linked to when the asset is brought into use in the business.

Payment obligation based upon delivery = the date of claim is generally linked to the date of delivery.

Payment due before delivery = the payment date can be used as the date of the claim but take care that ownership transfers in the same accounting period.

Part of the payment falls due more than four months after the date on which the obligation to pay becomes unconditional = the later payment date is used.

Milestone contracts = payments are treated as incurred immediately before the end of the chargeable period where conditions are met.

If your company has an accounting year-end on or after 1st April 2023, the 130% allowance will taper down. With the corporation tax rate set to increase from 1st April 2023, the effective tax relief will be similar pre/post-rate change.

Example:

30th September 2022 year-end
Allowance                                                       Corporation Tax Relief
£100,000 @ 130% = £130,000                      @ 19% = £24,700

30th September 2023 year-end
Allowance                                                      Corporation Tax Relief
£100,000 @ 115% = £115,000                      @ 22% = £25,300

Remember that the sale proceeds of assets where the Super-Deduction has been claimed are still inflated for accounting periods beginning before 1st April 2023 and ending after this date.

As usual there are anti-avoidance measures for contrived, abnormal or those transactions lacking a genuine commercial purpose. This includes contracts drafted specifically to bring forward capital allowance claims, deviating from normal commercial practice.