Is your accountant claiming your Super-deduction capital allowances?

Written by James Fairhurst

James has a background in accounts production, Corporation Tax and VAT for Sole Traders, Partnerships, Limited Companies and Academies. He is able to quickly and reliably gain an understanding of the accounting needs of a business, helping them to stay on top of their deadlines.

May 16, 2022

Having a good accountant can pay dividends.

But with all the new rules and regulations being put in place, is your accountant keeping up?

Since 1st April 2021, companies investing in qualifying new plant and machinery assets have been able to claim a “Super-deduction” capital allowance. Effectively, this is a big tax saving which is worth watching out for when buying big items!

Due to the economic lockdown, levels of business investment have fallen, and so the Super-deduction has been brought in to re-stimulate business investment.

But, we know for a fact that not everyone is taking advantage of it.

When submitting your company tax return, your accountant will need to manually opt in for the super-deduction, or else the company misses out on the additional tax relief available.

Let’s do an example:

Say, for example, your company has purchased equipment this last year totalling £10,000. It could be made up of a number of different things, perhaps a van, or some manufacturing equipment, and a new computer.

Normally, under the ordinary rules, the company would receive 100% capital allowances. This means that the full cost of the assets is knocked off the taxable profits.

In our example, this would mean that the tax bill is reduced by £10,000 x 100% x 19% (corporation tax rate) = £1,900 tax saving.

HOWEVER…

If you apply for the super-deduction, you get 130% as a capital allowance.

This means the tax saving would be £10,000 x 130% x 19% = £2,470. That’s an extra £570!

The 130% super deduction applies to qualifying main rate plant and machinery investments until 31 March 2023.

So, make sure you get it while you can. If you want to find out if you qualify, check out HMRC’s super-deduction factsheet or give us a call at Xoba, and we will be happy to help you understand how much you can save.

A Xoba, we assess every single client automatically and ensure they claim the super-deduction wherever possible.

Side note

There are other rules for special rate assets such as:

  • parts of a building considered integral – known as ‘integral features’
  • items with a long life
  • thermal insulation of buildings
  • cars with CO2 emissions over a certain threshold

These assets are eligible for a 50% first year allowance instead

Be sure to check out the official guidance for the full details.

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