HMRC’s latest ‘one-to-many’ letters, sent to some taxpayers, focus on the Super-deduction and whether capital allowances have been incorrectly claimed by companies. 

The 130% Super-deduction and 50% Special Rate (SR) Allowance came into effect on 1 April 2021 and are due to end on 31 March 2023. They are available only to companies, where expenditure is incurred on new and unused, qualifying, Plant and machinery.

HMRC have produced two different letters which have been sent to some taxpayers, with copies to their agents.

These letters cover two possible errors in Super-deduction and SR Allowance claims previously made:

  1. Leasing restriction.
    • As the Super-deduction and SR allowance are First Year Allowances, relief is generally not available where the asset is bought to lease or hire to another party.
  2. Timing of expenditure where the accounting period straddles 1 April 2021.
    • Allowances are only available where the expenditure was incurred on or after 1 April 2021.
    • In addition, allowances are not available where the contract was entered into before 3 March 2021.

Where a taxpayer concludes that their claim was incorrect, they are advised to amend their Company Tax Return and consider whether other Capital allowances may be available.

Useful guides on this topic

Super-deduction & First Year Allowances
What is the Super-deduction allowance? When does it apply and what is the rate of allowance? What other First Year Allowances (FYAs) are available? What is the SR Allowance? What if I dispose of an asset on which the Super-deduction or SR allowance has been claimed?

What expenditure qualifies for plant & machinery allowances?
What is plant and machinery? What expenditure qualifies as plant and machinery? What is treated as part of a building?

Capital allowances: Rates and allowances
What different types of capital allowances are available? What are the current and past rates of allowances?

Annual Investment Allowance (AIA)
What is the Annual Investment Allowance? What are the limits? What expenditure qualifies? 

Capital Allowances: What's new 2022-23
What's new in Capital Allowances for 2022 and 2023? A summary of the different types of capital allowances currently available to UK businesses.

Plant & machinery: Allowances
What capital allowances are available on plant and machinery? How do you calculate them? What are qualifying activities?

External links

CIOT: Super-deductions – HMRC One to Many Letters

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