To support the post-COVID-19 pandemic economic recovery, on 3 March 2021, The UK Chancellor, Rishi Sunak, announced the £25 billion tax break to boost business investment by providing a reduction of up to 25p for every pound of qualifying spending on plant and machinery. This Super Deduction aims to ensure the UK remains one of the most competitive markets.
Super-Deduction Legislation (published on 3 March 2021) states plant and machinery investment incurred under “a hire purchase or similar contract” have to fulfil “additional conditions” to be eligible for the super-deduction.
Some individuals are misled into believing that the tax break of 130% will exclude hiring purchase – or asset finance arrangements more broadly.
This is not necessarily the case, and in circumstances where your business is making payments to acquire an asset, and where there is intention and expectation to acquire legal ownership of the said asset at some point, you should be eligible for the Super-Deduction.
Make sure you are aware of any relevant anti-avoidance provisions that apply to, for example, contrived arrangements, agreements with connected parties, and second-hand assets.
There is also a clawback of the tax-saving if your business disposes of the asset before 1 April 2023.