As part of the measures announced by Chancellor Sunak  in an unprecedented Budget, companies incurring capital expenditure to acquire qualifying plant and machinery between 1 April 2021 and the end of March 2023 are entitled to claim 130% of the cost of their investment in the form of the Super-deduction. This will enable companies to save up to 25% on their corporation tax liability annually. The relief can be availed in the first year of the investment itself. In addition, the government has introduced an additional 50% first-year allowance (FYA) for special rate (long life) assets.

Whilst there isn’t a definitive list of assets classed as plant and machinery, the majority of tangible assets utilized in the ordinary course of business qualify as plant and machinery for the purposes of the Super-deduction and the FYA. These could include:

·        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

The following is an example of a company benefitting from the Super-deduction scheme:

Company A purchases an asset for £10 million. Under the previous system, the company could claim Annual Investment Allowance (100% of cost up to £1m) and subsequently claim 18% as Writing Down Allowances which would total £1.62m (18%*(£10m - £1m of AIA)). This would yield tax savings of £497800 (19%*£2.62m). Under the new Super-deduction scheme, the company can claim allowances worth £13 million (130%*£10m) in the first year itself thereby gaining a tax benefit of £2.47 million (19%*£13m).

To find out more about the possible government support schemes which your business can avail to successfully navigate through the Covid-19 pandemic contact Cheylesmore Chartered Accountants.  We can equip your business with the necessary tools to inject resilience but also begin rebuilding your business to bring it back to its pre-pandemic level of success and activity.