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How can the Corporation Tax Super Deduction be Claimed?

How do you thrive in 23

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.

How do you thrive in 23

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 weare@krystal-clear.co.uk.

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.

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