From 1st April 2021 until 31th March 2023, companies investing in qualifying new plant and machinery assets will be able to claim generous capital allowances. It was announced in the Budget that companies who pay corporation tax can have:
- a 130% super-deduction capital allowance on qualifying plant and machinery investments
- a 50% first-year allowance for qualifying special rate assets
These generous brand-new capital allowances are aimed at giving companies a strong incentive to make additional investments. This deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest. This means the UK capital allowances regime will be amongst the world’s most competitive. Experts believe this should act as a major investment catalyst as there has never been a better time to invest. The government is hoping it will will boost investment by £20bn a year.
Chancellor Rishi Sunak said: “With the lowest corporation tax in the G7, we need to do even more to encourage businesses to invest – for decades we have lagged behind our international peers. We need to unlock cash reserves so today I can announce the super-deduction. For the next two years when companies invest, they can reduce their tax bill with super deduction by 130% of the cost.”
For more information click here: https://www.gov.uk/guidance/super-deduction
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:
- Solar panels
- Computer equipment and servers
- Tractors, lorries, vans
- Ladders, drills, cranes
- Office chairs and desks
- Electric vehicle charge points
- Refrigeration units
- Foundry equipment
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 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.
- A tax information and impact note for the policy, and draft legislation, is published here.
Companies in the North East
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