As a result of measures announced at the 2021 Budget, businesses will now benefit from four significant capital allowance measures:
- The super-deduction – which offers 130% first-year relief on qualifying main rate plant and machinery investments until 31 March 2023 for companies
- The 50% first-year allowance (FYA) for special rate (including long life) assets until 31 March 2023 for companies
- Annual Investment Allowance (AIA) providing 100% relief for plant and machinery investments up to its highest ever £1 million threshold, until 31 December 2021
- Within Freeport tax sites, companies can access new Enhanced Capital Allowances (ECA+) and companies, individuals and partnerships can benefit from an increased level of Structures & Buildings Allowance (SBA+) for investments until 30 September 2026
Why is the government introducing a super-deduction?
- Since the Covid-19 pandemic, existing low levels of business investment have fallen, with a reduction of 11.6% between Q3 2019 and Q3 2020
- Much of the UK’s productivity gap with competitors is attributable to our historically low levels of business investment compared to our peers. Weak business investment has played a significant role in the slowdown of productivity growth since 2008
- Making capital allowances more generous works to stimulate business investment. As a result, these measures can promote economic growth and counter business cycles
- The super-deduction will give companies a strong incentive to make additional investments, and to bring planned investments forward
What are capital allowances?
- Capital allowances let taxpayers write off the cost of certain capital assets against taxable income. They take the place of accounting depreciation, which is not normally tax deductible. Businesses deduct capital allowances when computing their taxable profits
- The 130% super-deduction and 50% first-year allowance are generous brand new capital allowances for investments in plant and machinery assets purchased between 1st April 2021 and 31st March 2023. This means that businesses can cut their tax bill by up to 25p for every £1 they spend, making an investment in new equipment much more attractive. Both will allow investing companies to lower their corporation tax bills
What is plant and machinery?
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 assets. The kinds of assets which may qualify for either the super-deduction or the 50% FYA include, but are not limited to:
- Floorcare machinery, such as scrubbing and stripping machines, scrubber dryers, and rotary machines
- Laundry care
- Healthcare apparatus, like beds and mobility equipment
Eligibility criteria are outlined in the published tax information and impacts note, found here.
This policy really does make it an excellent time to upgrade or buy new machinery required for business purposes. For more information or advice about Wightman & Parrish equipment and supplies, please email sales@w-p.co.uk or complete this form.
%20copy.png){kind=logo}