A new 130% first year capital allowance for qualifying plant and machinery assets; a 50% first year allowance for qualifying special rate assets. We will cover everything in this blog so you know exactly what’s included and take advantage of this scheme.
The Super Deduction will apply from 1st April 2021 until 31st March 2023.
It will allow companies to reduce their tax bill by up to 25p for every £1 they invest making this capital allowance regime one of the most competitive in the world. The Government is encouraging firms to invest in productivity-enhancing plant and machinery assets that will help them grow, and to make them investments now.
The New Capital Allowances offer Businesses to benefit from four significant capital allowances measures:
Capital allowances let taxpayers write of the cost of certain capital assets against taxable income. It takes place of accounting depreciation which is not normally tax-deductible.
A business is usually required to ‘add back’ any depreciation, but can instead deduct capital allowances. For example, a corporation tax paying company with:
Accounting profits of £1,000
Depreciation expense of £200
Capital allowance claim of £300 would make the following adjustments
The two main types of capital allowances are:
The 130% super deduction and 50% first-year allowance are generous capital allowances for investments and will allow you to lower your corporation tax bills.
Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances.
There is not an exhaustive list of plant and machinery. The kinds of assets which may qualify for either the super-deduction or the 50% first-year allowance include, but not limited to:
More details of eligibility of different types of investments for different types of capital allowances are summarised below:
With the Super Deduction:
The super deduction is around until 31st March 2023 and companies should take advantage while it is around. As we said this is one of the world's most competitive capital allowance schemes and unlikely to see something like this again. If you need help or clarity over what could apply please get in touch and we will be more than happy to help!
This article was written for Saint Financial Group, a multidisciplinary group based in the UK that helps small businesses develop and grow. SaintFG offers a range of quality solutions in supporting businesses. If you need another further guidance or would like to know how we can work with you, get in touch today!
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