How to take advantage of the Super Deduction

Have you taken advantage of the Super Deduction allowance?
Only 7 months left!

There’s only 7 months left to take advantage of the ‘Super-Deduction’, which is one of the most attractive tax incentives for business investments ever offered by a British Government.

This deduction, which ends on the 31st March 2023, encourages firms to make business investments in productivity-enhancing plant and machinery assets that will help them grow.

Due to pandemic related uncertainty, business investment became weak, which slowed down productivity growth. Therefore, the government introduced this scheme as part of the budget back in 2021, to stimulate business investment. 

Do I qualify for the Super-Deduction?This tax break is for limited companies where corporation tax is chargeable. This, unfortunately, means that partnerships and sole traders are unable to benefit. 

So, what qualifies for the Super-Deduction? The following new plant and machinery that most likely will qualify includes (but is not limited to):

• Computers, printers, lathes and planers 
• Office equipment such as desks and chairs 
• Vehicles such as vans (as long as they are not considered to be cars. Cars, including low CO2 cars, are specifically excluded from the Super-deduction), lorries and tractors
• Warehousing equipment such as forklift trucks, pallet trucks and stackers
• Tools such as ladders and drills
• Construction equipment such as excavators, compactors, and bulldozers

Note that no deduction is available for used or second-hand assets.    

What about assets on Hire Purchase?Where possession of plant and machinery transfer to the acquirer but not the ownership, Super-Deduction can be claimed. So yes, new equipment obtained by HP can qualify – subject to conditions. 

Why should I take advantage of this?This allowance means companies can cut their tax bill by up to 25p for every £1 they invest. Say you invest £100,000 in qualifying new plant or machinery assets, when calculating your taxable profits your corporate tax deduction will be 130% of your initial investment; so £130,000.

When deducting £130,000 from your taxable profits, your business will save up to 19% of that. Saving you £24,700 corporation tax, if you qualify for super-deduction.

Can Super-Deduction create a loss? If the full deduction can’t be used by the business to set against its profits, a loss will be created which can be carried forward, as with all capital allowances.

Okay, how do I take advantage of this?

Get in touch with the team at Oldfield via  info@oldfieldadvisory.com or call 02476673160 and we will be happy to advise whether the Super-Deduction is something you can take advantage of, based on your own circumstances and business structure.

Please note: This article is provided for information only and was correct as at time of writing (30/09/22). Any lists and details provided above are not exhaustive and are not intended to be full and complete guidance.  No action should be taken without consulting detailed legislation or seeking independent professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this article can be accepted.