In March of 2021 the Chancellor of the Exchequer, Rishi Sunak, announced two new tax allowances for businesses known as ‘The Super Deduction Scheme’ and ‘The SR Allowance’.
The Super Deduction Scheme is a fantastic new tool that small businesses can use to help claim back a significant amount of tax if they invest in their business. It allows a business to reclaim 25% or 25p of every Pound, that is spent on new equipment or machinery between April 2021 and the end of March 2023.
Using this scheme can help any small business to expand, or replace aged machinery and equipment for less, and represents an opportunity for businesses big and small to recover from the economic woes of the Co-Vid 19 pandemic.
What is the ‘Super Deduction’?
The Super Deduction allows businesses to make huge savings on their corporate tax bills at the end of the financial year.
For the next two years, businesses can qualify for a 130% capital allowance deduction for any investments they make in any new main pool, or main rate, machinery and equipment. This allows companies to cut their tax bill by up to 25p for every £1 they invest in new equipment, which can amount to a lot of money if your business makes the right investments in qualifying machinery.
What Equipment and Machinery Qualifies for the Deduction?
The Super Deduction scheme applies to all machinery and equipment that would normally qualify for the 18% main pool rate deduction of capital allowances, also known as ‘writing down allowances’, in previous tax years.
This includes large scale equipment such as vehicles like trucks, lorries, and tractors, and also smaller-scale equipment like computers and office equipment. Office furniture can also be purchased in the scheme. This can help businesses to expand quickly and effectively and make space for new employees at a reduced cost to the business.
How Can Small Businesses Benefit from the Super Deduction Scheme?
This scheme is a great way for any business to recoup some of their investment in expensive machinery or equipment that is critical to the success of their business.
Commercial vehicles, for example, are eligible for this deduction. This means that businesses that need vans and cars, or tractors and farming vehicles and equipment, can claim back a quarter of the cost of these expensive items.
It doesn’t have to be large scale machinery like vans, trucks, and tractors either. Smaller-scale assets are also eligible for the super deduction scheme, helping businesses to invest in equipment that can help them increase productivity on-site, or replace older equipment and machinery for less. A farmer can invest in an air compressor, for instance, and use the scheme to claim back 25% of the investment.
The Super Deduction scheme gives businesses a fantastic incentive to invest in themselves after a challenging time. The pandemic had a massive impact on the global economy, and the British government has taken unprecedented steps to help support all British businesses in the wake of this once in a lifetime event.
By taking advantage of the Super Deduction scheme any business can make the investments it needs to grow and expand with confidence, and with an advantage over other businesses in Europe and across the world, helping them to stay competitive as the global economy bounces back.
Until next time.