Transitioning Rules from Super Deductions to Full Expensing – Accounting Periods Straddling 31 March 2023

The 2 year window for claiming the 130% Super Deduction for general rate plant and machinery expired on the 31 March 2023 and was replaced by 100% Full Expensing.

Companies finalising their tax returns that do not have a 31 March 2023 year end need to be mindful of the transitioning rules.

For any accounting year ends that straddle 31 March 2023, any 130% Super Deductions that have been claimed need to be proportionately reduced in the tax returns.  This is to prevent overlap with the period where the Corporation Tax rate increases to 25%.

For a chargeable period that ends on or after 1 April 2023, a lower percentage applies rather than the 130%.

This is as set out in HMRC’s Capital Allowances Manual as the link below.

The relevant allowance percentage in the final period where the super-deduction is available is calculated by dividing the total number of days in the chargeable period (up to 31 March 2023) by the total number of days in the whole period. This is then multiplied by 30% and 100%.

For example, the relevant percentage for the period ended 31 December 2023 would be as follows:

(90/365 x 30%) + 100% = 107.4%

This rate is then applied to all qualifying additions in the period.

Whilst the super deduction has been withdrawn, companies will still be able to claim Annual Investment Allowance (AIA) up to the current limit of £1m.

It is important to seek specialist advice and Lovell Consulting will be pleased to assist.  Please contact us on 020 7329 1300.

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