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Tax incentive provides support for new investment

31 March 2021

With much publicity given to the rise in UK corporation tax, set to increase to 25% from April 2023, there has been less coverage of the super-deduction option that launches tomorrow, 1 April.

Although only intended to run for the next two years, it provides up to 130% capital allowance relief for companies purchasing new plant and machinery.

With many facilities preparing for reopening or increased levels of activity, the super-deduction could provide an essential means to ensure that all areas remain compliant and operationally efficient.

In addition to the 130% capital allowance on investment in new plant and machinery, the scheme allows companies to claim up to 25% tax relief.

This was one of the topics to emerge from yesterday's PFM webinar discussing the most important areas of consideration for FMs and service providers preparing to reopen their facilities.

The topic was raised by Ascentae managing director Jon Knight, the sponsor of yesterday's event, who has provided the following example of how the super-deduction can work.

"A company incurring £1m of qualifying expenditure decides to claim the super-deduction. By spending £1m on qualifying investments, the company can deduct £1.3m (130% of the initial investment) in computing its taxable profits.

"By doing this the company will save up to 19% of that - or £247,000 - on its corporation tax bill," said Mr Knight.

More information on the super-deduction scheme can be found here.

He also explains that most tangible capital assets used in the course of running a business are considered to qualify as essential plant and machinery and will be relevant within the super-deduction.

In addition to the information above, a recording of yesterday's webinar will be posted on this website for those unable to attend the live discussion.

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