If you have plans to invest in machinery and equipment in 2023, you need to do two things: read this blog and then act quickly!
There is a generous capital allowance regime for incorporated companies coming to an end on 31 March 2023. Here’s what it is and how you could benefit from it.
Super deduction – what’s the big fuss about?
The impact of the coronavirus pandemic hit UK businesses hard. Amongst the financial support like bounce back loans and the furlough scheme, the government introduced a ‘super-deduction’ to allow companies to cut their tax bill when investing in qualifying new plant and machinery. It looks like this:
From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:
- a 130% super-deduction capital allowance on qualifying plant and machinery investments
- a 50% first-year allowance for qualifying special rate assets
The government wants to encourage companies to invest in assets and equipment that will help them grow and keep UK companies competitive. Super-deduction is an incentive to keep companies investing during a time where spending could easily be pulled back. Using the super-deduction they can cut their tax bill by up to 25p for every £1 they invest. Super!
Which plant and machinery actually qualifies for the super-deduction?
We understand that people feel hesitant when they see the word ‘qualifying’ – you immediately think the benefits are too good to be true! As a general rule of thumb, most tangible capital assets used in your business are considered as plant and machinery. Things like:
- office chairs and desks
- refrigeration units
- computer equipment and services
- solar panels
- electric vehicle charging points
- tractors, lorries, vans
- Foundry equipment
The quickest and easiest way to know if something qualifies is to ask your accountant. The super-deduction factsheet from the government website is also handy to scan through.
Electric vehicle charging points count – does that mean electric cars do too?!
If you’re investing in cars for your business, then electric cars or those with zero CO2 emissions do qualify for a different capital allowance but sadly not the super-deduction. They qualify for 100% first year allowances so you’ll be able to deduct the full cost of the car from your profits before tax.
Super-deduction ends on 31 March – is there enough time to use it?!
Yes there is but you must act now (do not procrastinate – we told you about that in our last blog!)
We would suggest you:
- make a list of the items you believe qualify and you’d like to purchase
- speak to your accountant to make sure they are eligible
- go shopping!
The key is to make sure you’ve purchased the items by 31 March 2023, even if they will be delivered to you at a later date.
There are no plans to extend the scheme and we’re unlikely to see such a generous offer in the foreseeable future. If you had plans to invest then take advantage of deducting up to 130% of the cost from your profits before tax before it’s too late!