Companies can now claim ‘super’ capital allowances on the purchase of new plant and machinery, and to a lesser extent on certain new fixtures and fittings.
These super allowances give a company enhanced corporation tax relief of 130% of the cost in the year of purchase for new plant and machinery. Examples of plant and machinery include commercial vehicles (vans and lorries), tools & machinery and IT equipment. Cars do not qualify.
For example, if your company is about to purchase a new delivery van for £50,000 it will be able to claim a corporation tax deduction against profits of £65,000 in the year of purchase.
Furthermore, there is also a 50% first year allowance for the cost of new qualifying fixtures and fittings within commercial buildings (these are assets which do not qualify as plant & machinery). We can help you to determine which fixtures will qualify.
There are, of course, strict conditions for these new allowances. The main one is that the item acquired must be brand new (not second-hand). Also, the equipment must not have been acquired in order to be hired-out. And the super allowance cannot be claimed in the year a business stops trading.
These super capital allowances only apply to expenditure incurred by companies between 1 April 2021 and 31 March 2023. The main corporation tax rate is due to increase to 25% on 1 April 2023 and this allowance is therefore an incentive to invest before that date.
Unincorporated businesses (e.g. sole traders) cannot claim the super capital allowances. But they can claim the 100% annual investment allowance on most items of plant and equipment, including on the purchase of second-hand equipment.
Good record keeping will be essential. You need to be able to identify separately each item which was subject to a super capital allowance claim, as if it is sold later some of the allowance may have to be clawed back.
If you need help with this or any other accountancy, tax and small business issues, get in touch for a no-obligation discussion – see our Contact Us page for how to reach us.
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