FINANCE
BY RICK SCHOFIELD , TAX PARTNER , AZETS
Is your business taking advantage of ' super capital allowances '?
LAST YEAR ’ S SPRING BUDGET PROVIDED A SOMEWHAT UNEXPECTED BOOST FOR COMPANIES PLANNING TO INVEST IN NEW ASSETS WITH THE INTRODUCTION OF ‘ SUPER CAPITAL ALLOWANCES ’. THE ENHANCED RELIEF IS DESIGNED TO ENCOURAGE BUSINESS INVESTMENT , WHICH IS AT HISTORICALLY LOW LEVELS .
There has been a significant slowdown of productivity since 2008 and the super-deduction gives businesses a strong incentive to make additional investments , and to bring planned investments forward .
By accurately identifying expenditure eligible for super allowances , businesses can effectively reduce the cost of assets and enhance investment returns – ensuring tax savings are fully optimised
What are super allowances ?
These new allowances are in addition to the existing Annual Investment Allowance ( AIA ) which , until 31 March 2023 , permits 100 % relief for up to £ 1m of expenditure incurred each year on qualifying plant and machinery assets .
• The super deduction – A new 130 % first year allowance for expenditure on main pool qualifying assets such as machinery , furniture , fittings , computers etc . Previously relief was at 18 % per annum .
• Enhanced special rate – A new 50 % first year allowance for special rate assets including integral features in buildings such as electrical , water and heating systems . Previously relief was available at 6 % per annum .
Cash tax savings are available to all companies and individuals , whether they are a UK resident or not . The tax relief identified can be offset against taxable profits if you pay UK corporation tax or UK income tax .
Who can claim super allowances ?
The new allowances are available to limited companies and can be claimed for qualifying expenditure incurred between 1 April 2021 and 31 March 2023 .
However , there are some exclusions :
• Sole traders , partnerships , and LLPs .
• Expenditure incurred under a contract entered before 3 March 2021 .
• Not available for second-hand assets . What are the key considerations ?
One key consideration to note is that disposal proceeds for the sale of assets where super allowances have been claimed will be taxed in full as a balancing charge .
Furthermore , any sale of a super deduction asset before 31 March 2023 will be subject to an enhanced disposal value calculated by a multiple of 1.3 . A tapered multiple is then applied to disposals in accounting periods which straddle 1 April 2023 .
Any sale of an enhanced special rate asset will trigger a balancing charge equal to 50 % of the disposal value .
Finally , business owners should look carefully at the timing of planned investment in new assets to take full advantage of the enhanced
allowances . Up to 31 March 2023 , the additional tax savings through super allowances will be most beneficial to companies that have already absorbed the 100 % relief available through the AIA .
Get in touch
The Azets capital allowances team are made up of multidisciplinary specialists that include chartered surveyors , tax advisors and accountants . This means we understand construction and valuation matters , as well as how to interpret necessary case law and complex tax legislation to maximise and accelerate the relief .
For more information or to discuss how to take advantage of super capital allowances , please contact rick . schofield @ azets . co . uk or speak to your local Azets advisor .
Local offices : Ashford : 01233 629 255 / Canterbury : 01227 454 861 Maidstone : 01622 690 666 / Orpington : 01689 827 505 Sandwich : 01304 249 997
Accounting | Tax | Audit | Advisory | Technology www . azets . co . uk
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