What is the Super-deduction Tax Break?

The March Budget saw Rishi Sunak announce a variety of positive measures that would be rolled out to help businesses, individuals and the British economy as a whole. One of these actions was the £25bn super-deduction corporation tax break, which has been designed to encourage companies to invest in plant and machinery.

How does the super-deduction tax break work?

The super-deduction offers 130% relief on qualifying plant and machinery investments. It’s already in place and continues until 31^st March 2023, which gives companies plenty of time to take advantage of this enormous saving.

For example, if your company were to spend £100,000 on qualifying equipment, this expenditure would normally fall within your annual investment allowance and produce tax relief of £19,000. However, thanks to the super-deduction, you’ll receive corporation tax relief at 19% on £130,000 instead of £100,000, which bumps it up to £24,700 (almost £6,000 more than usual).

How much will I save?

To put it more simply, the super-deduction allows companies to reduce their corporation tax bill by up to 25p for every £1 they invest in eligible equipment. This can seriously add up if your company decides to take this as an opportunity to upgrade business-critical systems, such as commercial vehicles, computer hardware and office furniture.

That being said, it will still make a positive difference even if you only make a few relatively small purchases. For instance, if you were to purchase £5,000 of qualifying equipment, you’ll receive tax relief of 19% on £6,500 instead of £5,000, which is an additional £285.

What kind of equipment is included?

To qualify for the 130% super-deduction, you need to purchase any of the following types of equipment:

• Computer hardware and IT servers (although not small equipment such as mouse and keyboard sets)
• Office furniture (desks, chairs, storage units etc)
• Some large energy-saving systems such as solar panels and a new boiler
• Electric vehicle charge points
• Commercial vehicles such as vans, lorries and tractors (but not cars or motorbikes)
• Refrigeration and HVAC units
• Ladders, drills and cranes
• Foundry equipment

The above list isn’t exhaustive, so make sure to give us a shout if you have an enquiry regarding eligible expenditure. You really should claim the super-deduction tax break as much as possible, as it will significantly benefit your ongoing cash flow.

Does it have to be new equipment?

Yes, the equipment has to be brand new. Unfortunately, used equipment doesn’t qualify for the super-deduction corporation tax relief.

Can any business claim the super-deduction?

Only incorporated companies that pay corporation tax are eligible. Providing you pay corporation tax, you can claim the super-deduction tax relief on as much expenditure as you wish within the given period.

We’re here to help

We love supporting business owners across the UK by offering expert financial advice and the highest quality of tax management. For more information, call our Yorkshire office on 01482 235575, our London office on 0207 885 0605, or fill in our contact form.