Time is Running Out for Super Deduction Tax Allowances

Time is running out for businesses to take advantage of the government’s “super deduction” tax incentive, which allows companies to claim 130% capital allowances on new commercial vehicles and vans purchased before the end of March 2023. This means that for every £1 spent on new vans, a company can reduce their taxable profits by £1.30. The super deduction is a temporary measure aimed at boosting investment and economic growth during the ongoing COVID-19 pandemic, but with March coming soon, this valuable opportunity will end soon.

Tax Savings

One key benefit of capital allowances super deduction is that it can help businesses save money on the purchase of new vans. With the 130% allowance, a company can significantly reduce the overall cost of a new van as well as the amount of tax they pay on their profits. For example, if a company spends £50,000 on a new van it can reduce its taxable profits by £65,000 (130% of £50,000). This could result in significant tax savings for the company.

Environmental Benefits

Something to consider is that super deduction applies to vehicles that emit no more than 50g of CO2 per km. Super deduction can therefore be seen to support environmentally friendly transportation options and the government has made it clear that the goal is to encourage the adoption of electric vehicles. This means companies can de-fleet older vehicles and replace them with newer Euro 6 vehicles, or even purchase electric vehicles, and receive the super deduction and at the same time lower the carbon footprint of the company and help protect the environment.

Restrictions

Companies should take note, however, that there are some restrictions on the types of vehicles that qualify for the super deduction. For example, the super deduction only applies to vehicles that are primarily used for business. Additionally, vehicles that are leased rather than purchased outright do not qualify for the super deduction.

Lead Times

It’s worth noting that many businesses may be considering purchasing new vans to take advantage of the super deduction. But there may be longer than normal lead times for these orders due to supply chain disruptions caused by the ongoing COVID-19 pandemic. Therefore, it’s important for companies to plan and place their orders as soon as possible to ensure that they can take delivery of the vehicles before the end of March. With the uncertainty of the pandemic and market demands, new vehicle manufacturers are running on different lead times than normal, and ordering soon could save businesses from disappointment and not being able to qualify for the super deduction. We’re in regular contact with our current customers and advise new customers to contact us quickly to find out about current lead times for the new vans they’re interested in, and factor that into their decision-making process.

Conclusion

Super deduction tax allowance is a great opportunity for businesses to purchase new vans and save more money. With this incentive, businesses can invest in new vehicles, expand their operations, and reduce their carbon footprint. The super deduction is only available until the end of March, so we advise acting quickly to take advantage of this tax relief. We also advise consulting with a tax professional or accountant to ensure that they fully understand the super deduction and how it applies to their business, and order as soon as possible to ensure delivery within the time frame to qualify for the super deduction.

Please note: We are not accountants, tax specialists, or financial advisors.  We always recommend getting professional advice from tax specialists or accountants.