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How can the Corporation Tax Super Deduction be Claimed?

How can the Corporation Tax Super Deduction be Claimed?

In the 2021 Spring Budget the Chancellor announced the Corporation Tax  ‘Super Deduction’ tax relief.

The idea is to encourage companies to invest in new equipment as part of kick starting the economy after the ravages of the Covid19 pandemic.

SO if you have a company and you are considering buying machinery, vehicles, equipment, computers, etc then this article is a must-read.

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WHAT IS THE SUPER DEDUCTION?

The Super Deduction means that for the next 2 years the amount spent by a company on qualifying assets is increased by 30% on the company’s corporation tax return.

The company’s profits then are reduced by this amount…meaning a lower corporation tax bill.

To help explain this let’s use an example….

Let’s say a company with a profit of £200,000 buys a van for £25,000.

In the corporation tax return, the figures would be…

                                                                With Super                                          No Super

                                                                Deduction                                           Deduction

Profit                                                      200,000                                               200,000

Van                                                       – 32,500                                              – 25,000

Taxable Profit                                       168,500                                               175,000

Corporation Tax (19%)                          32,015                                                 33,250

In this example, by claiming the super deduction the company has reduced it’s corporation tax bill by £1,235.

WHAT ASSETS QUALIFY FOR THE SUPER DEDCTION?

There is no definitive ‘list’ of which assets qualify.

BUT to help below is a list of plant & machinery that we believe will qualify for the extra tax relief from the super deduction:-

  • Office chairs & desks
  • Machine Equipment
  • Computer equipment & servers
  • Lorries & vans
  • Electric vehicle charge points

WHAT QUALIFYING CRITERIA MUST BE MET?

Before claiming the super deduction for any qualifying asset purchases there are a number of other qualifying criteria that must be met :-

  • The business MUST be a limited company (sole trader/partnerships can’t claim)
  • Qualifying assets must be bought in the 2 years from 1st April 2021 to 31st March 2023
  • To qualify an asset MUST be bought NEW.

It doesn’t matter how the asset has been bought – the important point is that the company MUST own it. That means it doesn’t have to be bought outright with cash – it could be bought by taking finance such as a business loan or HP.

ALERT

Assets bought secondhand or used DON’T qualify.

Assets ‘bought’ on lease DON’T qualify.

SO WHAT NEXT…?

If you’re considering some new equipment for your company then it will be important to know how much tax relief the Super Deduction would be worth to you.

Knowing how much extra tax relief could be claimed may change your mind as to whether you buy new or secondhand or whether you buy it or lease it.

If you’d like our opinion and help before you go ahead and commit to making a purchase then please give us a call on 0161 410 0020 or email us at [email protected].

It is important that you take professional advice before making any decisions based on the information that you learnt here. While every effort has been made to make sure it is accurate it cannot be precisely tailored to your personal circumstances. This article is for general information only and no action should be taken, or refrained from, as a result of this information.  Professional advice should be taken based on specific circumstances in each individual case.  Whilst we endeavour to ensure that the information contained in the article is correct, no liability will be accepted by Krystal Clear Accounting which is a trading name of Kim Marlor Associates Ltd or damages of any kind arising from the contents of this communication, or for any action, inaction or decision taken as a result of using any such information.

What are Bank Feeds and how do they work?

In short, bank feeds create a digital link between your business bank account and your accounting software, such as Xero or QuickBooks.  

This means bank transactions are automatically downloaded into the accounting software. This simple piece of automation, completely removes the need to manually input every bank receipt and payment into the accounting software. 

Having bank feeds in place, saves a HUGE amount of time bookkeeping. That’s because it completely removes the need to manually input bank transactions into the accounting software. 

Saving time bookkeeping isn’t the only benefit for the business…. 

 

 

How can the corporation tax super deduction be claimed?

What are the main benefits to a business using bank feeds?

  • Saves Time & Money Bookkeeping

Bank feeds automate, what was previously, a time-consuming task of entering all the bank transactions into the accounting software. 

 This saves the business a HUGE amount of time (& money) spent on bookkeeping.  

  • Improves Cash Flow Visibility

With bank transactions being downloaded from the bank every day, it means it’s quicker and easier to keep the bank balance in the accounting software up-to date. 

With the accounting software up-to date, the bank is updated daily which gives you a clearer, real-time view of your business’s cash flow.  

This makes it easier for you to plan your cashflow, and take action to improve it. 

  • Enhanced Accuracy

There is always the risk of errors being made when data is being manually inputted into the accounting system. It is often time-consuming to find and correct any errors. Also, if an error is large then the Profit & loss and Balance Sheet reports will be inaccurate and potentially misleading. 

 Automating the bank transaction entry previously manual process, reduces the risk of errors being made and ensures that the bookkeeping records and reports are accurate. 

How to Link Your Bank to Xero

  • 1. Setup Online Banking:

Ensure that your bank account is set up for online banking. This feature is typically available from all major banks. 

  • 2. Add Bank Account in Xero:

Log into your Xero account and navigate to the banking section. Select ‘Add Bank Account’ and follow the prompts to search for your bank. 

  • 3. Enable Bank Feeds:

After adding your bank account details, you’ll see an option to set up bank feeds. Click ‘Agree’ to the terms, then securely log into your online banking portal through Xero to authorize the connection. 

 

Are Bank Feeds Safe & Secure?

Yes. 

Firstly, having bank feeds in place ONLY means bank transactions are downloaded into the accounting system. They do NOT give anyone else access to the business bank account. 

 Secondly, XERO has various security measures in place to give you a piece of mind that your financial data is safe and secure: 

 

  • Encrypted Connections: Xero uses advanced encryption technology to secure the data transmission from your bank to Xero. This means your sensitive information is encrypted during transit and cannot be intercepted or read by unauthorized parties. 

 

  • Compliance and Standards: Xero adheres to high standards of data security compliance, thus ensuring that its practices meet or exceed industry security standards and regulations. 

 

  • Regular Renewals: To maintain a high level of security, XERO requires that the bank feed connection is renewed every 90 days. This process is straightforward and helps ensure that the integrity of your financial data is always protected. 

 

people are connected
KIm Marlor the MD of Krystal Clear Accounting
krystal clear accounting

In Summary

In short, having bank feeds really saves businesses time and money on their bookkeeping.  

 They automate and eliminate what is otherwise a time consuming and error prone manual process.  

 Bank feeds is just one of the ways technology can be used to help business owners improve the financial side of their business.

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Krystal Clear Accounting
Ground Floor, Westgate House, 44 Hale Road, Hale, Altrincham, Cheshire,
WA14 2EX

Email: [email protected]
Phone: 0161 410 0020

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