Am I Eligible for the Super-Deduction Tax Break?

The super-deduction tax break was introduced as part of Rishi Sunak’s “investment-led recovery” plan designed to mitigate the economic impact of the COVID-19 pandemic. This scheme was predicted to boost business investment by 10% – that is, an extra £20 billion each year.

Read on to learn more about how this scheme works and whether your business’ spending is eligible.

How does the super-deduction tax break work?

Under the super-deduction tax break, when an incorporated business invests in certain plant and machinery, it will qualify for a 130% capital allowance deduction. This can then be used to reduce their corporation tax bill. The scheme allows companies to save 25p for every £1 spent on eligible business assets.

Still unsure of how this works in practice? Here’s an example:

If your company spent £100,000 on plant machinery in February 2022, you would be able to claim the super-deduction tax and therefore deduct £130,000 (130% of £100,000) from your overall taxable profits for that year.

Your company would then save 19% (the main rate of corporation tax) of the amount you deducted – 19% of £130,000 is £24,700. In other words, you will have saved roughly 25p for every £1 you spent.

Please note that this is a hypothetical scenario – it is always best to consult a professional when making investment and tax-related decisions.

Is my business expenditure eligible?

According to the HMRC guidance manual, the following conditions must be met in order for your expenditure to be eligible for the super-deduction:

• The expenditure was paid for on or after 1 April 2021 but before 1 April 2023.
• The expenditure was incurred by a company that qualifies for corporation tax, i.e. an incorporated company.
• The business asset(s) purchased are deemed to be plant or machinery, as defined in this section of the HMRC guidance manual.
• The expenditure is not one of the few exceptions stipulated in the guidance manual.

Based on these criteria, everything from computers and vehicles to toolkits and alarm systems is potentially eligible for the super-deduction. To summarise, assets that are acquired for the purposes of carrying out a trade or service should theoretically qualify for the super-deduction.

Are company vehicles eligible investments?

Cars are not considered to be eligible plant or machinery and therefore do not qualify for the super-deduction. However, LCVs and HGVs that are owned outright by a company do qualify as plant and machinery, meaning they are eligible for the super-deduction. You must be able to demonstrate that the vehicle is used for business purposes.

This tax break can allow your business to make investments which will be beneficial in both the long term and the short term. Whether you want to upgrade your old vans or are expanding your business and now require a fleet of vans, this scheme could save you a lot of money.

Looking for new vans for your company? Van Sales in Bristol offers a wide range of reliable vans that are ideal for commercial use. Not only are our vans likely to be eligible for the super-deduction, but we also offer new van deals and van finance options. You’re sure to find an affordable solution that meets your requirements at Van Sales UK. Get in touch for more information.