Businesses across Cirencester and Malmesbury and beyond should evaluate and re-assess their future investment plans in light of the tax-saving opportunities offered by the new super-deduction, according to McGills Chartered Accountants.
This new capital allowance scheme, announced in the Budget, is a new form of Corporation Tax relief that could help companies to reduce their tax bill by as much as 25p for every £1 of qualifying expenditure in new plant and machinery.
Designed to help businesses invest in equipment, such as computer equipment and servers, electric vehicle charge points and commercial vehicles, such as vans, lorries and construction equipment, this new tax allowance will be available from 1 April 2021 until March 2023.
A business spending on £10,000 on qualifying assets would be able to reduce its Corporation Tax bill by £2,470.
“Many businesses are still struggling with cash flow management, debts and other issues, but with a timeline for lockdown being lifted it is important that owners and management teams prepare for the future,” said Simon Nuttall, Partner at McGills Chartered Accountants.
“If the nation is to enjoy a quicker recovery, businesses need to invest in new equipment and innovations that are going to help them to grow and flourish.
“This new capital allowance offers companies a unique opportunity to significantly reduce the amount of tax they pay on profits while helping them to purchase the plant and machinery they need to rebuild.”
Businesses can use an additional first-year allowance of 50 per cent on most new plant and machinery investments that ordinarily qualify for special rate writing down allowances, which include improvement to past of a building considered integral, thermal insulation and items with a long life.
“Providing a potential tax saving of up to 10p of every £1 of qualifying expenditure this additional allowance, alongside the main super-deduction, could give businesses the financial support they need to succeed.” said Simon.
McGills Chartered Accountants added that the new capital allowances operate alongside existing schemes, such as the Annual Investment Allowance (AIA), which permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million until January 2022.”
“Companies looking to invest in new plant and machinery in the near future should wait until after 1 April to enjoy the tax relief afforded by this new scheme,” said Simon.