How can the Corporation Tax Super Deduction be Claimed?
Posted on 9th May 2022
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.
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
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.
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@example.com.