The government’s super-deduction tax scheme, which enables businesses to deduct up to 130% of the cost of assets from their taxable profits, ends on 31st March.
What is it?
The Government sought to encourage capital spending and boost productivity with this new allowance, which was announced in the 2021 Budget. From April of that year companies have been able to claim 130% capital allowances on new plant and machinery investments that would usually qualify for 18% tax relief.
The super-deduction means businesses can cut taxes by up to 25p for every £1 they invest.
For example, a company investing £100,000 can claim a deduction of £130,000 against taxable profits, saving upto 19% of that – or £24,700 – on its corporation tax bill.
Who can claim?
Companies that pay corporation tax and invest in plant or machinery on or after 1 April 2021 are eligible. Sole traders, partnerships and limited liability partnerships do not qualify.
What assets qualify?
The capital investment must be in new and unused plant and machinery and there is no expenditure limit. Assets can be funded via hire purchase but cannot be leased as ownership of asset must be demonstrated.
Eligible assets for the
- Cranes and diggers
- Machinery and tooling
- Computer equipment and software
- Office furniture
- Commercial vehicles such as tractors, lorries and vans (not cars).
Eligible assets for the 50% FYA
- Electrical and lighting systems
- Hot and cold-water systems
- Air-conditioning systems
- Solar shading.
- Second-hand or used assets
- Buildings and structures (excluding integral features).
There has never been a better time to make that investment. Remember, the super-deduction tax scheme ends on 31st March, so get in touch now.
For more information on this allowance from HM Revenue & Customs, please refer to their website: www.gov.uk/guidance/super-deduction and we suggest you contact your Accountant to discuss your individual eligibility position.