Last year was certainly a rollercoaster. From the highs of the Platinum Jubilee, the Lionesses winning the Euros, and a successful Commonwealth Games \u2013 to the lows of the war in Ukraine and the death of the Queen. Of course 2022 also saw the cancellation of the long-running Australian soap opera Neighbours, but whether that sits in the debit or credit column is in the eye of the beholder.\n\n\n\nThe summer also witnessed some wild swings in the direction of numerous tax policies that were variously announced, U-turned and then partially or fully reinstated under some combination or other of the year\u2019s four Chancellors and three Prime Ministers. It seems that good neighbours may become good friends in Ramsay Street, but not necessarily in Downing Street.\n\n\n\nAmongst the many policies that found themselves at the mercy of the storm-tossed seas of politics was the proposed rise in the rate of Corporation Tax. \u201cFirst there is a rate rise, then there is no rate rise, then there is\u201d, as might have been sung by Donovan (not Jason).\n\n\n\nThis rise, from 19% to 25%, is significant \u2013 a 32% increase, and the first Corporation Tax rate rise since 1973. The new rate will come into effect on 1 April 2023.\n\n\n\nWhen it was first announced in the 2021 Budget by Chancellor Rishi Sunak, there was clearly a concern that the rise would discourage business investment. Why invest today and claim tax relief at 19% when you can invest next year and benefit from relief at 25%?\n\n\n\nThe solution was the temporary Super-Deduction: a flagship policy, announced with much fanfare as the \u201clargest ever business tax cut\u201d, the Super-Deduction offered 130% relief for expenditure on main pool plant and machinery between April 2021 and March 2023.\n\n\n\nDesigned to bridge the two years before the rate rise came into effect, the allowance was carefully chosen: 130% at 19% equates to relief of 24.7%, close enough to the new higher rate as to effectively remove the feared disincentive.\n\n\n\nWith those two years now drawing to a close, let\u2019s consider the withdrawal arrangements. Naturally, things are not as straightforward as you\u2019d hope.\n\n\n\nIn many cases, a tapering calculation is needed to make sure tax relief is claimed at the right rate.\n\n\n\nThis will affect companies with an Accounting Period that straddles the withdrawal date of 31 March 2023. For the straddling Accounting Periods, the 130% is replaced by the \u201cRelevant Percentage\u201d, or \u201cRP\u201d.\n\n\n\nThe RP is calculated as the number of days of the Accounting Period that fall before the withdrawal date, as a proportion of the total Accounting Period, multiplied by the 30% Super-Deduction uplift, plus 100. It\u2019s marginally easier to understand through a worked example.\n\n\n\nLet\u2019s say a company has a twelve-month Accounting Period ending on 31 December 2023. Ninety days of that AP fall before 31 March 2023. The calculation would run as follows:\n\n\n\nRP = ((90\/365) x 30) + 100 = 107.40%\n\n\n\nThis percentage will apply to any main pool plant bought between the start of the Accounting Period and 31 March 2023.\n\n\n\nClearly this is still more attractive than the 18% writing down allowance that will apply to any main pool plant bought after 31 March 2023. It\u2019s also higher than the 100% relief that would be available under the Annual Investment Allowance scheme.\n\n\n\nNevertheless it may be significantly lower than the 130% anticipated based on a simple reading of the headline rate, so care should be taken to be sure of working with accurate figures when preparing claims or investment appraisals.\n\n\n\nIt should also be noted that the usual rules still apply to govern when expenditure is deemed to have been incurred for the purposes of Capital Allowances. It\u2019s likely that sizeable investments in the first quarter of 2023 will come under close scrutiny by HMRC as they look for attempts to shift the timing of expenditure to benefit from the Super-Deduction.\n\n\n\nThis is a complex area of tax and getting it right is important, but do remember that expert professional advice is only a footstep away.\n\n\n\nWritten by Russell Bennet, Head of Capital Allowances from Claritas Tax.