Many businesses may have been too short of cash to take advantage of the new super-deduction for investing in new plant in 2021 but may be more confident about investing in 2022.
This tax break, which started on 1 April 2021 continues until 31 March 2023, allows companies to deduct 130% of the cost of new plant and machinery from their profits where that plant would normally be included in the general capital allowances pool.
If a company buys a new commercial vehicle costing £50,000 that means they can deduct £65,000 from trading profit saving £12,350 in corporation tax. Note that there would be a clawback charge on the disposal of the asset, which could be as much as 130% of the proceeds.
There is currently no financial limit on the amount that the company spends on new equipment qualifying for 130% tax relief. If you’d like to make use of this deduction, please contact us to help plan accordingly.
£1 Million Annual Investment Allowance still available
Second-hand plant and machinery does not qualify for the 130% super-deduction but would still qualify for the 100% Annual Investment Allowance (AIA). The amount of expenditure qualifying for 100% tax relief was originally scheduled to revert to just £200,000 from 1 January 2021 but will now continue at £1 million until 31 March 2023.
Although the 130% super-deduction only applies to limited companies the AIA is available to sole traders and partnerships as well.
Remember that there is currently a further 100% first-year allowance for the cost of buying a new zero-emission car for the business. Previously 100% relief was available where the CO2 emissions of the car were no more than 50g per kilometre. However, that threshold changed in April 2021.
January 7th, 2022
