Examples for super-deduction and special rate first year allowance
Published 1 June 2022
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Examples of when a business can claim
You should check if you can claim and if your plant and machinery qualifies.
When a business can claim the super-deduction
On 1 December 2021, Alpha Ltd spends £10,000 on a new lathe. Alpha Ltd has a calendar year accounting period.
In the accounting period ending 31 December 2021, they can claim a super-deduction of 130% which equals £13,000 for this expenditure.
When a business can claim the special rate first year allowance
On 1 December 2021, Bravo Ltd spends £10,000 on a solar panel for:
- installation at its business premises
- use in its business
In the accounting period ending 31 December 2021, they can claim the 50% special rate first year allowance which equals £5,000 for this expenditure.
The remaining balance of expenditure, after deducting the special rate first year allowance, is £5,000. This may be added to the special rate pool in the following accounting period and writing down allowances can be claimed.
Example of working out the relevant percentage for the super-deduction
Charlie Ltd has a calendar year accounting period ending 31 December 2023.
On 1 February 2023, Charlie Ltd incurs ‘super-deduction qualifying expenditure’ of £1,000. Because the accounting period ends after 1 April 2023, Charlie Ltd is entitled to claim a super-deduction at the relevant percentage rather than 130%.
There are 90 days in the accounting period before 1 April 2023. The total number of days in the period is 365.
To work out relevant percentage, they first divide 90 by 365. Then they multiply the result by 30 and add 100.
To work out the amount they can claim, they multiply their ‘super-deduction qualifying expenditure’ (which is £1,000) by the relevant percentage.
This gives them a super-deduction entitlement of £1,074.
Examples of working out the balancing charge
Find out what you must do when disposing of a super-deduction or special rate first year allowance asset.
When disposal of a super-deduction asset takes place in an accounting period ending before 1 April 2023
Delta Ltd has an accounting period ending 31 March.
On 1 May 2021, Delta Ltd incurs expenditure of £6,000 for a printer, and claims a super-deduction of £7,800 for the accounting period ending 31 March 2022.
On 1 February 2023, Delta Ltd sells the printer for £4,000 so the disposal value is £4,000.
Because they claimed the super-deduction for the full cost of the asset, the relevant proportion is 1.
The relevant proportion of the disposal value is:
1 x £4,000 = £4,000
Because their accounting period when they disposed of the asset ends before 1 April 2023, they multiply this result by 1.3.
£4,000 x 1.3 = £5,200
This means the balancing charge to be brought into account, in the accounting period ending 31 March 2023, is £5,200.
When disposal of a super-deduction asset takes place in an accounting period that includes 1 April 2023
Echo Ltd has an accounting period ending 31 December.
On 15 June 2021, Echo Ltd incurs expenditure of £20,000 for a new van and claims a super-deduction of £26,000 for the accounting period ending 31 December 2021.
On 1 December 2023, Echo Ltd sells the van for £10,000.
Because they claimed the super-deduction for the full cost of the asset, the relevant proportion is 1.
The relevant proportion of the disposal value is:
1 x £10,000 = £10,000
The accounting period when they disposed of the asset includes 1 April 2023, so this result needs to be multiplied by the relevant factor.
The number of days in the accounting period before 1 April 2023 is 90. The total number of days in the period is 365.
To work out relevant factor, they first divide 90 by 365. Then they multiply the result by 0.3 and add 1.
They multiply this result by £10,000, which gives them a balancing charge of £10,739.
When disposing of a special rate first year allowance asset
Foxtrot Ltd has an accounting period ending 31 December.
On 1 September 2022, Foxtrot Ltd incurs expenditure of £1,000,000 for a long-life asset and claims the 50% special rate first year allowance of £500,000 for the accounting period ending 31 December 2022.
On 1 September 2025, Foxtrot Ltd sells the asset for £500,000, which means the disposal value is £500,000.
The ‘relevant allowance expenditure’ is £1,000,000. As they claimed the special rate first year allowance for the full cost, this means the ‘total relevant expenditure’ is also £1,000,000.
They divide the ‘relevant allowance expenditure’ by 2:
£1,000,000 ÷ 2 = £500,000
They then divide this result by the ‘total relevant expenditure’ to get the ‘relevant proportion’:
£500,000 ÷ £1,000,000 = 0.5
To get the ‘relevant proportion’ of the disposal value, they multiply this result by the disposal 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.