The Budget on the 3rd March 2021 included a number of important changes to the capital allowances regime.
Summary of main changes
1. Main Pool
- Super-deduction (from 1st April 2021 until 31st March 2023)
- Rate increased from 18% to 130%
- Only available to Companies (not LLP's or Individuals)
- Originally not available to property companies (Leasing exclusion) - This exclusion was later repealed to allow property companies to benefit
- For new Capex only - contracts entered into on/after the 3rd March 2021
- Clawback rules apply through balancing charges on disposals within certain time frame
- No upper Cap
2. Special Rate Pool
- First-year allowance (from 1st April 2021 until 31st March 2023)
- Rate increased from 6% to 50%
- Only available to Companies (not LLP's or Individuals)
- Not available to property companies (Leasing exclusion) - This exclusion was later repealed to allow property companies to benefit
- For new Capex only - contracts entered into on/after the 3rd March 2021
- Clawback rules apply through balancing charges on disposals within certain time frame
- No upper Cap
3. New Freeports
- 8 English sites include; East Midlands Airport, Felixstowe & Harwich, Humber Region, Plymouth, Solent, Liverpool City Region, Teesside and Thames
- Structures and Buildings Allowances (SBA's) - rate increased from 3% to 10% if first used before the 30th September 2026
- Enhanced Capital Allowances (ECA's) - 100% first year allowances for plant and machinery expenditure incurred before the 30th September 2026
4. Annual Investment Allowance (AIA) - £1m extension until the 31st December 2021 (as previously announced), reducing to £200,000 after the 1st January 2022.
5. Extended loss carry back for businesses - temporary extension from one to three years, capped at £2m in years 2 and 3
We await further detailed guidance to be published by HMRC in the coming months.
