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Budget 2021: Devil in the detail - Tax reliefs for purchasing plant and machinery

Back in March, the Chancellor, Rishi Sunak introduced several measures to support small businesses in the wake of the pandemic as part of his Spring budget. Most were widely publicised at the time, but a hidden gem relating to tax relief for heavy machinery went largely unreported.

A little-known measure introduced in the Budget was a new temporary tax relief for those who invest in plant and machinery. Designed to stimulate business investment, the measure increases the incentive to invest in plant and machinery by offering higher rates of relief.

Businesses that have invested or will invest in new plant and machinery between 1 April 2021 and 31 March 2023 can claim for this period:

  • A super-deduction providing allowances of 130% on most new plant and machinery investments. These would ordinarily qualify for 18% main rate writing down allowances
  • A first-year allowance of 50% on most new plant and machinery investments that usually qualify for 6% special rate writing down allowances. 

Capital allowances allow businesses to write off the costs of tangible capital assets such as plant or machinery, against their taxable income. First year allowances enable businesses to claim enhanced rates of relief providing the claim is made in the period that the expenditure is incurred. A super-deduction is an enhanced first year allowance, which provides an allowance that exceeds the cost of the asset. 

For businesses considering investing in their plant or machinery in the coming couple of years this new measure will be a considerable support. For more information on this measure and how it could impact your business click here