The super deduction tax scheme is a temporary incentive programme introduced by the UK government to stimulate business investment and economic growth following the COVID-19 pandemic.
A generous capital allowance scheme, super deduction allows businesses to claim 130% of the cost of qualifying plant and machinery investments against taxable profits.
This article explains the ins and outs of the scheme and why your business should act today to ensure it doesn’t miss out on potential tax benefits.
Eligibility and qualifying assets
The super deduction scheme is available to any business subject to corporation tax. This makes the scheme relevant to limited companies. To qualify, your business must have invested in new and unused plant and machinery assets between April 1st 2021 and March 31st 2023.
Qualifying assets include:
- Computers, printers, and other office equipment
- Office furniture, such as desks and chairs
- Commercial vehicles, such as vans, lorries, and tractors (cars are ineligible)
- Warehouse equipment
- Construction equipment
- Manufacturing tools and machinery
It’s important to note that sole traders and partnerships are ineligible for this scheme. In addition, main rate plant and machinery qualify for the 130% super deduction, while special rate assets may be eligible for a 50% first-year allowance.
Benefits of investing now
So, what are the benefits of taking advantage of the super deduction scheme? Here are some compelling reasons why your business should invest now:
- The super deduction scheme can lead to significant tax savings by allowing your business to cut its tax bill by up to 25p for every £1 invested in qualifying assets.
- Other capital allowances, such as the Annual Investment Allowance (AIA), have an upper limit on the claimable amount. The super deduction doesn’t have an upper limit.
- The super deduction scheme provides immediate upfront relief, allowing your business to reduce its liability in the year of purchase rather than spreading it across several years.
- Investing in new plant and machinery can give your company a competitive advantage through improved efficiency, productivity, and growth.
- The super deduction scheme aims to boost economic recovery following the global COVID-19 pandemic, helping participating businesses to benefit.
Deadlines and how to claim
The main scheme ended on March 31st 2023. However, there are still plenty of opportunities for your business to benefit:
An extended claim period allows your business to claim the full super deduction before March 31st 2025, if your financial year-end falls outside the traditional timeline.
In addition, any accounting period spanning April 1st 2023, may be able to claim a reduced super deduction rate, and businesses can still claim on eligible expenditure incurred during 2022 and the initial deadline of March 31st 2023, as businesses have two years to file tax returns.
Here’s how to prepare your claim:
- Review your capital expenditure between April 1st 2021 and March 31st 2023. Identify all qualifying purchases made in this period.
- Ensure you have detailed records of purchases, including invoices and contract documentation.
- Consult professional accountants to help maximise your claim and comply with all regulations.
- File your claim with HMRC.
Why your business should act fast
While the main super deduction period ended in 2023, there are several compelling reasons for your business to act fast and ensure you claim any eligible allowance.
These include:
- The final deadline to claim the full super deduction for most businesses falls on March 31st 2025.
- Even if your business can only claim reduced rates, the scheme still offers significant savings on your tax liabilities compared with other capital allowances.
- Making the most of your previous investments can help you gain a significant competitive advantage in the marketplace.
- Benefitting from tax reliefs on upgraded plant and machinery can help accelerate growth and maximise the impact of changes to UK tax law.
With the final deadline to claim the super deduction looming at the end of March this year, time is running out for you to claim relief on qualifying asset purchases. So, don’t miss out. Begin the process today to enjoy maximum savings while you can.
How ASD Accountants can assist
ASD Accountants are Slough-based accountants for limited companies. We can help your business maximise the benefits of the super deduction before the eligibility window closes on March 31st 2025.
We can assess your business’s eligibility for relief by assessing which asset purchases qualify for the scheme and accurately calculate how much you can claim, particularly if your company’s accounting periods span the scheme’s initial closing date of March 31st 2023.
In addition, teaming up with our expert team to optimise your claim allows us to consider factors like investment timings and interaction with other potential tax reliefs while ensuring full compliance with all HMRC regulations.
Contact us today to understand how ASD Accountants can help your business benefit from the super deduction today and allow us to help your business maximise its tax efficiency without the risk of incurring financial penalties.
