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Super Deduction applicability

What does the new super deduction apply to?

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Following the announcement of the super deduction in the 2021 Budget, I had hoped this would apply to a wide range of businesses, however according to gov.uk it looks like it will only cover "qualifying plant and machinery assets". Does anyone have any insight into this, as it only seems useful to the construction industry or similar, and not if you're investing in other types of equipment such as I.T. infrastructure.

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By tom123
04th Mar 2021 10:46

Plant & Machinery includes IT, surely?

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By ribbon90
04th Mar 2021 10:55

Machinery to me sounds like it would be equipment used for manufacturing etc.

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Replying to ribbon90:
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By tom123
04th Mar 2021 11:02

A lot of modern machinery is fairly integrated with IT too, of course.

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By paul.benny
04th Mar 2021 11:02

There are plenty of industries that invest in plant and machinery apart from construction.

If my investment plans were dependent on this allowance, I'd want to wait until we have the final legislation. Given the apparent generosity, there may be some tightening of the criteria.

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By Paul Crowley
04th Mar 2021 11:12

It is only 30% extra

Cannot believe an extra 30% will be a decider on whether to invest

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Replying to Paul Crowley:
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By tom123
04th Mar 2021 11:36

Maybe not if it was a straight invest/not decision.

But will definitely have a timing effect.

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Replying to Paul Crowley:
blue sheep
By Nigel Henshaw
04th Mar 2021 16:36

my thoughts exactly,

If you are going to be subject to 25% CT anyway there is no incentive to bring forward any planned investment

If you are a small business its probably not worth the extra cost of buying new and getting 130% instead of buying second hand to get 100% AIA.

Seems to me like Rishi is making more of this than there is to make

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Replying to NH:
paddle steamer
By DJKL
04th Mar 2021 19:50

Some interesting commentary from Tait Walker (we have only used them re vat but this caught my eye)

https://www.taitwalker.co.uk/insight/knowledge/budget-2021-super-deduction/

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Replying to DJKL:
blue sheep
By Nigel Henshaw
04th Mar 2021 20:33

Yes absolutely agree with that, I also think the media have got confused with this, maybe its just me but this from the Guardian gives completely the wrong idea
"The super deduction will effectively pay companies to invest in plant and machinery for two years. Companies can cut their tax bills by 130% of the value of investments made between 1 April 2021 and 31 March 2023"
Really? I have a client like this who really believed that AIA means that hmrc are paying for his new computer

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Replying to NH:
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By Paul Crowley
04th Mar 2021 20:50

A common misunderstanding by people who do not do numbers
Watch Richi again
That is how it sounded to me when announced
Numbers and words really do not go together

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Replying to DJKL:
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By Paul Crowley
04th Mar 2021 20:47

Good analysis
Well spotted

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Stepurhan
By stepurhan
04th Mar 2021 11:32

According to where on gov.uk?

Abbreviated guidance too often incorrectly describes the actual legal position for the sake of brevity. That is even without considering if IT fits the description anyway.

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Replying to stepurhan:
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By ribbon90
04th Mar 2021 11:45

That's according to this page:
https://www.gov.uk/guidance/super-deduction

The I.T. example aside, it doesn't sound like it would cover things like a sound engineer buying a new mixing desk for their studio, for example. Does that qualify as 'machinery'?

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Replying to ribbon90:
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By Paul Crowley
04th Mar 2021 12:07

It definitely is plant by my understanding

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Replying to ribbon90:
Tony s
By Tony S
04th Mar 2021 12:13

I think you're possibly confusing HMRC definition of Plant & machinery with the everyday definition.

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Replying to ribbon90:
Stepurhan
By stepurhan
04th Mar 2021 13:04

ribbon90 wrote:

That's according to this page:
https://www.gov.uk/guidance/super-deduction

The I.T. example aside, it doesn't sound like it would cover things like a sound engineer buying a new mixing desk for their studio, for example. Does that qualify as 'machinery'?

As I suspected, only three paragraphs and one of those is just the government congratulating themselves on how wonderful they are.

I would wait for the actual legislation to clarify things.

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Replying to ribbon90:
By SteveHa
04th Mar 2021 13:48

Your sound engineer example, if (s)he is a sole trader is excluded not because of the nature of the cost, but because (s)he is not a business liable to corporation tax.

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Replying to ribbon90:
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By zahzah
10th Mar 2021 10:09

The factsheet is very clear
'Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances'
There is not an exhaustive list of plant and machinery assets. The kinds of assets which may
qualify for either the super-deduction or the 50% FYA include, but are not limited to:
• Solar panels
• Computer equipment and servers
• Tractors, lorries, vans
• Ladders, drills, cranes
• Office chairs and desks,
• Electric vehicle charge points
• Refrigeration units
• Compressors
• Foundry equipment

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

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Replying to zahzah:
Psycho
By Wilson Philips
10th Mar 2021 10:19

One thing that is not clear is whether the SD will be available in respect of software capitalised as an IFA but eligible for CAs by virtue of a CTA 2009 s815 election. I can't see anything in the draft legislation that says that it will not, but ...

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By petercooperuk
04th Mar 2021 14:07

Good news, the draft legislation seems to include any plant and machinery which you would otherwise be able to claim AIA on (that is, subject to the s46 exclusions, so no cars, I'm afraid!)

This means all sorts of things will be possible, not only things you might ordinarily consider to be "machinery" like a printing press but things HMRC considers plant and machinery like computers, software, certain types of data, etc. Just not if you're buying them to lease out. Provisos also apply to hire purchase situations.

https://www.gov.uk/government/publications/new-temporary-tax-reliefs-on-... will get you a little closer than the other link shared here.

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Replying to petercooperuk:
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By Dib
04th Mar 2021 14:29

Yes, if the OP had looked at the legislation, (s)/he would have found that part 2 of the CAA 2001 is headed "Plant and Machinery Allowances" and covers everything that ordinary capital allowances (including AIA and FYAs) can be claimed on!

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By Duggimon
04th Mar 2021 15:23

Plant and machinery is pretty much all tangible assets that aren't cars or buildings.

The super deduction applies to more or less everything you can have capital allowances on, per the draft legislation.

https://assets.publishing.service.gov.uk/government/uploads/system/uploa...

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Replying to Duggimon:
blue sheep
By Nigel Henshaw
04th Mar 2021 16:30

Including Electric Cars which will be good

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Replying to NH:
Psycho
By Wilson Philips
04th Mar 2021 16:47

Are you 130% certain about that? (Because I'm not even 50% sure that it is correct)

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Replying to Wilson Philips:
blue sheep
By Nigel Henshaw
04th Mar 2021 16:53

Wilson Philips wrote:

Are you 130% certain about that? (Because I'm not even 50% sure that it is correct)

According to the experts at Croner this afternoon - I should have qualified my statement with that - is there any reason why they would not be included?

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Replying to NH:
Psycho
By Wilson Philips
04th Mar 2021 17:13

Yes - because as noted already, all cars are excluded by virtue of s46(2), which takes them out of the super-deduction.

A FYA for electric cars is then given by virtue of s45D and s52(3) - that table is to be amended by insertion of the new FYAs, but the provision for electric cars is not removed (or amended).

s45D specifically provides for a FYA to be given for electric cars. That is not the same as saying that s46(2) does not apply to electric cars (although the effect may be the same).

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Replying to Wilson Philips:
Psycho
By Wilson Philips
04th Mar 2021 18:35

Actually, I’m not entirely happy with my logical analysis - I’ve always struggled with an apparent circularity of s45D and s46. However, my conclusion- for now - remains the same. If I’m wrong there is a conflict within the revised legislation - the car cannot be within both the first item in 52(3) and the new item.

Unless it’s one of the new Tesla Schrodingers.

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Replying to Wilson Philips:
blue sheep
By Nigel Henshaw
04th Mar 2021 18:44

Either way your point is well made, must admit my head has been spinning today, I had the croner webinar on in the background and sat up straight when they said electric cars would be included.
I will take it up with them directly tomorrow

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Replying to NH:
Psycho
By Wilson Philips
04th Mar 2021 20:06

Taking it further, the other categories of assets in the table at 52(3) are also potentially eligible for the super-deduction. Clarification is indeed required.

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Replying to NH:
Psycho
By Wilson Philips
05th Mar 2021 10:49

I'll be interested to hear what Croner have to say on the subject. Having had time to reflect on this, and read the legislation properly, my conclusion remains that the 130% allowance will not be available to electric cars.

Without the benefit of s46(4) any electric car would be excluded under general exclusion 2 and would therefore be denied FYA treatment under s45D. However, s46(4) specifically provides that general exclusion 2 does not apply to cars otherwise qualifying under s45D. What it does not say (for now) is that exclusion 2 does not apply for the purposes of the 130% allowance. So, s45D it is.

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Replying to Wilson Philips:
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By Paul Crowley
05th Mar 2021 11:02

As always we do not really know the intention.
But I would be surprised if the intension was to encourage companies to spend all their money on tax free director benefits

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Replying to Paul Crowley:
blue sheep
By Nigel Henshaw
05th Mar 2021 13:14

Paul Crowley wrote:

As always we do not really know the intention.
But I would be surprised if the intension was to encourage companies to spend all their money on tax free director benefits

On the other hand, not allowing Electric Cars to have 130% simply encourages a company to wait 2 years until they are subject to 25% tax anyway

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Replying to Wilson Philips:
blue sheep
By Nigel Henshaw
05th Mar 2021 13:29

The webinar was from Croner-I, having spoken to the Croner helpline this morning there seems to be a conflict of opinion.
The Croner-I panel take the view that because the SuperD provisions fall under the FYA part of the legislation it will follow that Electric Cars will be included, that opinion was as I say made quite clear in the webinar and has been confirmed today.
The Croner advice line however do not agree with this at present and therefore the advice given has to be to assume that they will be excluded.
Either way we will only know for sure when we get more detail in the Finance Bill on the 11th March.

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Replying to NH:
Psycho
By Wilson Philips
05th Mar 2021 13:51

Agreed - my final point would therefore be that electric cars do indeed fall within the FYA provisions, but only because there is a specific exclusion from the general exclusions, to give allowances under s45D (and, currently, under no other FYA provison). Needless to say, I am currently in agreement with the advice line.

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Replying to Wilson Philips:
By tonyaustin
10th Mar 2021 10:52

I agree with you. The draft legislation does not permit the 130% allowance on the general exclusions in S46(2). General exclusion 2 is cars. S46 (4) simply states that general exclusion 2 does not prevent an electric car being first year qualifying expenditure under S45D. It does not remove electric cars from the general exclusions altogether. The 130% allowance applies to all plant and machinery which qualifies for a standard 8% writing down allowance, other than that in the 8 general exclusions in S46 (2) and ring fence trades. The 50% FYA applies to plant and machinery qualifying for the 6% wda, such as integral features, unless excluded by S46 (2). It's all on gov.uk with link on HMRC home page.
https://www.gov.uk/government/publications/new-temporary-tax-reliefs-on-...

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Replying to NH:
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By petercooperuk
04th Mar 2021 16:42

Just because I'm not 100% sure if you mean it's good that electric cars will or won't be allowed to be included in the super deduction.. I wanted to point out that they won't due to "it is not within any of the general exclusions in section 46(2) of CAA 2001"

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Replying to Duggimon:
ALISK
By atleastisoundknowledgable...
08th Mar 2021 13:21

Duggimon wrote:

Plant and machinery is pretty much all tangible assets that aren't cars or buildings.

That's the definition I use.

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By hannahaston
18th Mar 2021 15:05

So do we think electric cars are included?? I've just had this question from a client.

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Replying to hannahaston:
Psycho
By Wilson Philips
18th Mar 2021 15:24

I don't think that they are included. I know that - subject to changes to the draft legislation - they are excluded.

I can't speak for others, who may have a different opinion.

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