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Tax Relief

HMRC Announce 130% Tax Relief on any VO Capital Equipment Purchase.

Policy Paper

New Temporary tax reliefs on qualifying capital asset investments from 1 April 2021

Published 3 March 2021

HMRC Announce 130% Tax Relief on any VO Capital Equipment Purchase.

Who is likely to be affected

Companies within the charge to Corporation Tax who invest in plant and machinery on or after 1 April 2021.

General description of the measure​

This measure will temporarily introduce increased reliefs for expenditure on plant and machinery. For qualifying expenditures incurred from 1 April 2021 up to and including 31 March 2023, companies can claim in the period of investment:


  • a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18%main rate writing down allowances
  • a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate
    writingdown allowances
    The measure also temporarily amends the rules covering expenditure incurred on plant and machinery used partly in a ring fence trade in the oil and gas secto

Policy objective

This measure is designed to stimulate business investment. It does so by increasing the incentive to invest in plant and machinery by offering higher rates of relief than were previously available.

Background to the measure

Background to the measure Capital allowances allow businesses to write off the costs of tangible capital assets, such as plant or machinery, against their taxable income. They take the place of commercial depreciation, which is not an allowable tax deduction.
First-year allowances allow enhanced rates of relief for certain plant and machinery investments, providing claims are made in the period the expenditure is incurred. The super-deduction is an enhanced first-year allowance providing an allowance exceeding
the cost of the asset.

Any investment or expenditure on new Powerdown220 Voltage Optimisation (VO) Equipment, from April 1st 2021 up to March 31st 2023, will qualify for the new 130% tax relief rate. This measure effectively reduces the tax adjusted cost of capital for millions of companies, large and small, investing in qualifying VO plant & machinery.

 

As an example, any Powerdown 220 client spending 100k on new VO plant & machinery will be able to claim tax relief of £24,750 against the capital investment.