Super-deduction: what does it mean for my business?

As part of the Government’s support for businesses affected by COVID-19, the introduction of the 'super-deduction' in the Budget of March 2021 is a tax incentive for businesses to invest in productivity-enhancing plant and machinery assets.

Published

10th June 2021

Category

Business Graph

 

What is it?

The Government introduced a new capital allowance in the March budget for businesses that pay corporation tax. These businesses will be eligible for:

  • a 130% super-deduction capital allowance on qualifying plant and machinery investments
  • a 50% first-year allowance for qualifying special rate assets

 

How can my business benefit from it?

The super-deduction tax will allow companies to invest in new equipment whilst offering them the opportunity to cut their tax bill by up to 25p for every £1 they will spend or have spent on plant and machinery investments from 1 April 2021 until 31 March 2023. Example 1:

  • Spending £100,000 on qualifying investments will mean the company can deduct £130,000 (130% of the initial investment) in computing its taxable profits.
  • Deducting £130,000 from taxable profits will save the company up to 19% (Corporation Tax rate) of that – or £24,700 – on its corporation tax bill.

This is calculated as follows: £100,000 x 130% x 19% = £24,700. Under the previous rules, savings would have been £19,000.

The above calculation is for illustration purposes only, a number of factors may affect this calculation for your business.

 

What assets are categorised as plant and machinery?

The kind of assets that qualify are, but are not limited to:

  • HGV and LCV mobile cranes
  • Agricultural equipment
  • Plant manufacturing equipment including machinery
  • Buses and coaches
  • Portable generators 
  • Computer equipment and servers

It should be noted that for asset finance, only assets funded specifically under an HP agreement will qualify.

If you are interested in finding out more about how your business can benefit from the Government’s super-deduction tax via our asset finance solutions, please get in touch by contacting us on 01268 269500 or email us at info@renaissanceaf.com Please visit our dedicated business recovery hub for more information positioned to help support your business and your teams, as you transition to a post-lockdown working environment.

Please visit our dedicated business recovery hub for more information positioned to help support your business and your teams, as you transition to a post-lockdown working environment.

 

Renaissance Asset Finance is the Asset Finance division of Arbuthnot Latham, a full service private and commercial bank whose history dates back to 1833. We provide nationwide asset finance facilities to SMEs and High-net-worth individual (HNWI) to support their investment in new or used capital equipment, soft and hard assets. We can finance a wide variety of assets with values typically in the range of £10k to £5m.


Renaissance Asset Finance Limited is a wholly-owned subsidiary of Arbuthnot Latham and Co., Limited. We are authorised and regulated by the Finance Conduct Authority and are members of the FLA and NACFB. Registered in England and Wales 8885289.

 

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