New Super-Deduction Tax Break on all Handling Concepts Equipment

What does the new Super-Deduction Tax Break offer? 

Measures announced in the latest Budget, offer businesses benefits when purchasing qualifying new plant and machinery.

For any purchases of qualifying assets between the 1^st of April 2021 and the end of March 2023, businesses can claim 130% capital allowance on their investment.  

This means for every £1 a business invests, their taxes are cut by up to 25p.  

Businesses will also benefit from a 50% first-year allowance for qualifying special rate assets, including long-life purchases. You can find the full details of the capital allowance offered on the Government Website.  

What are capital allowances? 

Capital allowances is the practice of allowing taxpayers to get tax relief on their tangible capital expenditure by allowing it to be deducted against their annual taxable income. 

They are a replacement of accounting depreciation, which is not an allowable deduction in UK and Irish tax returns. Capital allowances can therefore be considered a form of ‘tax depreciation’, a term more widely used in other tax jurisdictions such as the US.  

Source: https://en.wikipedia.org/wiki/Capital_allowance  

Why was the Super-Deduction Tax Break brought in? 

To encourage greater business growth, the government has opened the door for UK businesses to invest and embrace the opportunities that are available right now.  

To boost investment and promote UK industrial recovery from the COVID-19 pandemic and the associated lockdown, the government introduced the new tax break.  

This is an attractive incentives and it could reduce the purchase cost by almost 25% and save you thousands of pounds on your investment.  

What qualifies as plant and machinery?

Capital assets used during a business are considered plant and machinery for the purposes of claiming capital allowances. The kinds of assets which may qualify for either the super-deduction or the 50% FYA include, but are not limited to are: 

• IT and office equipment 
• Solar panels 
• Energy efficient lighting 
• New factory equipment like automation, warehouse machinery, industrial handling equipment such as cranes, manipulators, vacuum lifters, etc 

This is splendid news for Handling Concept customers based in the UK. By investing in lifting equipment with us, you could make great savings and growth for your business. 

For example: 

• A company incurring £1m of qualifying expenditure claims the super-deduction  
• Spending £1m on qualifying investments will mean the company can deduct £1.3m (130% of the initial investment) in computing its taxable profits  
• Deducting £1.3m from taxable profits will save the company up to 19% of that—or £247,000—on its corporation tax bill.  
  
  

How to claim capital allowances 

When you have worked out your capital allowance, you can claim back on your company tax return. The amount you can claim is deducted from your profits.  

You must claim in the accounting period you bought the item if you want to claim the full value under the annual investment allowance or first year allowance.  

For this Super-Deduction Tax Break means assets purchased between the 1^st of April 2021 and the end of March 2023.  

The date you bought the asset is either: 

• When you signed the contract (if payment is due within less than 4 months) or  
• When the payment is due (if it is due more than 4 months later) 

If you buy something with a hire purchase contract, you can claim for the payments you have not made yet. However, you cannot claim the interest on these payments.  

You can find out more on the government websites associated pages.  

Find out more 

Eligibility criteria are outlined in the published tax information and impacts note, found here.  

The information in this blog has been sourced from the government website, found here.  

If you are ready to invest in the growth of your business, contact us today and we will work with you to assess and help you solve your material handling problem.