VAT Bill / Corp Tax

Super Deduction Tax


The Government announced a super-deduction tax in their 2021 Budget that will encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow, and to make those investments now.

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.

What is the super-deduction tax break?

The super-deduction tax break means that for qualifying assets that your business purchases throughout the year, will allow you to claim 130% tax relief and offset this against taxable profits.

Under the super-deduction, for every pound a company invests, their taxes are cut by up to 25p.

For example:

  • Investing in plant and machinery of £100,000.
  • The corporation tax deduction will be £130,000 (130% against your taxable profit).
  • Current Corporation Tax relief at 19%, giving you a tax relief saving of £24,700.
  • £100,000 X 130% X 19% = £24,700

Does my business qualify for the super-deduction tax break?

Any company that pays corporation tax and purchases plant or machinery assets after 1st April of this year can qualify for the tax incentive.

Sole traders, partnerships and LLPs do not qualify.

When does the super-deduction tax break end?

The super-deduction tax incentive lasts until 31st March 2023.

What criteria must the assets meet?

The capital investment must be in new and unused plant and machinery.

Assets can be funded via a hire purchase agreement but cannot be leased as ownership of asset must be demonstrated.

Types of assets which may qualify but are not limited to:

  • Solar panels
  • Computer equipment and servers
  • Tractors, lorries, vans
  • Ladders, drills, cranes
  • Office chairs and desks,
  • Electric vehicle charge points
  • Refrigeration units
  • Compressors
  • Foundry equipment

For more information about the Super Deduction Tax, talk to Tower on 01753 837 050 (option 3) or contact us here.

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