Examples of Super Deduction and Special Rate First Year Allowance

Examples of when a company can claim

You should check if you can apply and if your plant and machines are eligible.

When a business can claim the super-deduction

On December 1, 2021, Alpha Ltd spends £10,000 on a new round. Alpha Ltd has a calendar year accounting period.

In the accounting period ending December 31, 2021, they can claim a super deduction of 130%, which equals £13,000 for these expenses.

When a company can apply for the special rate first year allowance

On December 1, 2021, Bravo Ltd spends £10,000 on a solar panel to:

  • installation in its professional premises
  • use in your business

During the accounting period ending 31 December 2021, they can claim the 50% Special Rate First Year Allowance, which is equivalent to £5,000 for these expenses.

The remaining balance of expenses, after deducting the First Year Special Allowance, is £5,000. This can be added to the special rate pool in the next accounting period and allowances can be claimed.

Example calculation of the relevant percentage for the super-deduction

Charlie Ltd has a calendar year accounting period ending 31 December 2023.

On February 1, 2023, Charlie Ltd incurs “super-deductionable expenses” of £1,000. As the accounting period ends after 1 April 2023, Charlie Ltd is entitled to claim super-deduction at the relevant percentage rather than 130%.

There are 90 days in the accounting period before April 1, 2023. The total number of days in the period is 365.

To calculate the relevant percentage, they first divide 90 by 365. Then they multiply the result by 30 and add 100.

To work out how much they can claim, they multiply their ‘super-deduction eligible expenses’ (which amount to £1,000) by the relevant percentage.

This gives them a super-deduction entitlement of £1,074.

Balancing Load Calculation Examples

Find out what to do when you have an asset with a super-deduction or a special rate first-year allowance.

When the disposal of a super-deduction asset takes place during an accounting period ending before April 1, 2023

Delta Ltd has an accounting period ending March 31.

On May 1, 2021 Delta Ltd incurs expenditure of £6,000 for a printer and claims a super-deduction of £7,800 for the accounting period ending March 31, 2022.

On February 1, 2023, Delta Ltd sells the printer for £4,000, so the sale value is £4,000.

Because they claimed the super-deduction for the total cost of the asset, the relevant proportion is 1.

The relevant portion of the transfer value is:

1 x £4,000 = £4,000

As their accounting year in which they disposed of the asset ends before April 1, 2023, they multiply this result by 1.3.

£4,000 x 1.3 = £5,200

This means that the balancing load to consider, in the accounting period ending March 31, 2023, is £5,200.

When the disposal of a super-deduction asset takes place during an accounting period that includes April 1, 2023

Echo Ltd has an accounting year ending on 31 December.

On June 15, 2021, Echo Ltd incurs expenses of £20,000 for a new van and claims a super-deduction of £26,000 for the accounting period ending December 31, 2021.

On December 1, 2023, Echo Ltd sells the van for £10,000.

Because they claimed the super-deduction for the total cost of the asset, the relevant proportion is 1.

The relevant portion of the transfer value is:

1 x £10,000 = £10,000

The accounting period in which they disposed of the asset includes April 1, 2023, so this result should be multiplied by the relevant factor.

The number of days in the accounting period before April 1, 2023 is 90. The total number of days in the period is 365.

To calculate the relevant factor, they first divide 90 by 365. Then they multiply the result by 0.3 and add 1.

They multiply that result by £10,000, giving them a balancing charge of £10,739.

When disposing of a special rate first year allocation asset

Foxtrot Ltd has an accounting period ending on December 31.

On September 1, 2022, Foxtrot Ltd incurs expenditure of £1,000,000 for a long-lived asset and claims the 50% special rate first year allowance of £500,000 for the accounting period ending December 31, 2022.

On September 1, 2025, Foxtrot Ltd sells the asset for £500,000 meaning the disposal value is £500,000.

‘Relevant allowance expenditure’ is £1,000,000. As they claimed the Year One Special Allowance for the full cost, this means that the ‘total relevant expenses’ is also £1,000,000.

They divide the “relevant compensation expenses” by 2:

£1,000,000 ÷ 2 = £500,000

They then divide this result by the “total relevant expenses” to obtain the “relevant proportion”:

£500,000 ÷ £1,000,000 = 0.5

To obtain the “relevant proportion” of the transfer value, they multiply this result by the transfer value:

0.5 x £500,000 = £250,000

Because they claimed the allowance for the full cost of the asset, the “relevant proportion” of the disposal value is half of the disposal value.

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