Does your business need to invest in some new plant and machinery assets?

For qualifying expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim a 130% super-deduction capital allowance on new plant and machinery. The new super-deduction allows businesses to increase the normal tax-deductible expense on qualifying expenditure by 30%.

For example:

If you were to spend £15,000 on new computer equipment and servers before 1 April 2021 you would be able to offset 100% of £15,000 against your taxable profit.

This change means you will now be able to deduct 130% of £15,000 against your taxable profit. In this example you would be deducting £19,500 against your taxable profit.

Resulting in a 19% saving of £15,000 before 1 April 2021 and a 19% saving of £19,500 after 1 April 2021.

What qualifies as a plant and machinery asset?

 

Most tangible capital assets which are used for your business day to day use are considered as plant and machinery. Examples of the types of assets which may qualify for the new capital allowances are as follows:

  • Computer equipment and servers
  • Tools and Equipment capital expenditure e.g., drills, cranes and ladders
  • Lorries
  • Vans
  • Office chairs and desks

The new measure is a very generous taxable deduction which will allow investing companies to decrease their corporation tax bills.

All plant and machinery must be new purchases to qualify, used plant and machinery would not qualify for the super deduction. This is to encourage businesses to invest in new assets, potentially slightly earlier than scheduled to do so. For further detailed information, please visit HMRC.

If you are unsure how this would affect your tax position and if you are unsure if an asset would qualify for this, please contact our team on 01724 848343. We would be more than happy to assist.