The end of super-deduction – what it means for your business
The government introduced this rather heroic-sounding tax relief in the face of falling business investment since the Covid-19 pandemic. This resulted in a sluggish growth in productivity that reared its head as far back as 2008.
Super-deduction for capital investments has now come to an end as of March this year, but it doesn’t mean you can’t reap the benefits of this generous tax relief, especially if your year end doesn’t fall at the end of March. You can still claim for part of the year. So, let’s get into how you can go about taking advantage of super-deduction on your business investments.
What is super-deduction?
Super deduction is a tax relief on the first year of capital allowance, offered to companies who have qualifying plant and machinery that was bought between 1st April 2021 and 31st March 2023. The government offered 130% relief for companies who invested in new plant and machinery in the hope that they would revive a slow economy and encourage strong business growth.
What qualifies as plant and machinery?
You can claim for the capital allowance for capital assets that include plant such as tractors, lorries, vans and cranes, and machinery such as computer equipment, power tools and compressors. You can even claim for office chairs and desks and electric vehicle charging outlets.
If super deduction is over, what am I claiming for?
Well, if your accounting period goes beyond the 31st March cut-off date, you can still claim at your year end for what you invested in during the qualifying period.
What does this mean in layman’s terms? Your company will be able to claim between 19p and 25p for every £1 you invest in your recent plant and machinery purchases, depending on the size of your business. By investing in your company – refreshing plant and machinery assets – you will also be lowering your corporation tax bill.
A quick calculation for you:
You invest £100,000 in qualifying plant and machinery on 1st Dec 2022. You can deduct 130% of that investment from taxable profits. That’s £130,000 you can deduct if your year end is 31st March 2023. If however, your accounting period end date straddles the 31st March, then your accountant will calculate a hybrid rate to apply to the capital allowances you invested, so speak to your accountant who will make the correct pro-rata calculations for you.
Still confused? If you’d like a guide to walk you through claiming for super-deduction, contact Grant-Jones accountancy today, we’d love to help you get the most out of your accounts.
