7.4.2021 | Tax

Super-deduction to help boost the economy

Andrew Diver of Beatons Group explains how the tax break will impact the freight and logistics sector.

Last month the Chancellor set out his vision for the UK’s road to recovery as the country begins to slowly unlock.

One of the key announcements in his budget, and one that could have a huge impact on freight and logistics in the east, is the introduction of the new super-deduction tax break.

Here, Andrew Diver, Head of Tax at Beatons Group, explains what super-deduction is and the role it could play in kickstarting the economy, post-pandemic.

What is the super-deduction?
Essentially, the super-deduction will give businesses the opportunity to deduct 130% of the cost of purchasing assets, such as trucks, plant and machinery, against their profits.

For example, with corporation tax currently at 19%, buying an asset of £100,000 would result in a £130,000 deduction against tax – reducing the liability by £24,700.

The Government hopes the new scheme will encourage firms to invest in productivity-enhancing trucks, plant and machinery now, helping them grow in the future.

When and how does the super-deduction apply?
The super-deduction applies to ‘qualifying assets’ and will last until March 31, 2023.

The Government says most tangible assets used during the course of business are considered as plant and machinery – so the term encompasses a lot.

Examples of machinery that would be included in the super-deduction would be items such as lorries, tractors, cranes, and vans as well as office and computer equipment.

This will benefit companies looking to update their vehicle fleets as well as firms that have increased their staff numbers and need new IT equipment.

The super-deduction would also help companies that now look to get more of their staff back into the office after lockdown but need to invest in equipment to do so, such as COVID screens.

Who can apply for a super-deduction?
The super-deduction is on offer to any business that pays corporation tax.

This means most businesses – from giants like Amazon to small firms just starting out – can take advantage of the scheme.

If a company is eligible for a super-deduction, there is no limit to the level of purchases permitted under the scheme.

Unfortunately, sole traders and partnerships will not be eligible for this relief.

However, they could benefit from the annual investment allowance on qualifying asset purchases, which would still be a 100% deduction.

If you have any questions regarding the new rules and how they might impact your business, please get in touch with Beatons Group on 01473 659777 or info@beatons.co.uk

For more information about Beatons Group, click here.