What is super-deduction?

In the 2021 Spring Budget, to encourage business investment and promote economic growth, it was announced there would be a temporary increase in the tax relief for companies on the purchase of qualifying assets.

This temporary increase is from 1 April 2021 until 31 March 2023 and during this period companies investing in qualifying new plant and machinery assets will be able to offset against taxable profits:

• a 130% super-deduction first year capital allowance on qualifying plant and machinery investments
• a 50% first year allowance for qualifying special rate assets

The super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest. This provides significantly faster tax relief for qualifying investments, helping businesses to invest and grow.

Example

If you were to buy a scanner, for example, before or after the super-deduction period with a cost of £20,000 this would qualify for annual investment allowance and the full £20,000 would be offset against your profits saving you £3,800 in tax in the year it was bought.

However, if you were to buy that same scanner during this temporary increase you would be able to offset £26,000 against your profits for the year saving you £4,940 in tax which is an increase in saving of £1,140. So don’t wait and buy now!

What expenditure qualifies?

Expenditure must be on new and unused assets. The purchase must have taken place on or after 1 April 2021, but before 1 April 2023. Assets can be funded via cash or Hire Purchase finance. Leased assets, however, are not eligible for these allowances.

Nearly all assets used within the course of running a business are considered plant and machinery for the purposes of claiming capital allowances. Some examples include:

• Dental equipment
• Fixtures and fittings (furniture, such as desks or tables)
• Scanners
• Computer Equipment and Servers
• Solar panels
• Electric vehicle charging points

So pretty much everything you would buy for your dental practice as long as it is new.

So what does this mean for you?

This means that if you were undecided, or planning for substantial equipment purchases in the future, then it is well worth bringing those plans forward, investing in new equipment before April 2023 and taking advantage of this additional tax relief.

If you are unsure of any of the above or want more information on how this can help you then please don’t hesitate to get in touch.