One of the most recent announcements from the UK Government relates to the new super-deduction tax break, a scheme specifically designed for assisting UK businesses.
In this article, we would like to share what the new tax break is and how companies can benefit from it.
What is a tax break?
To put it simply, tax breaks for companies (or tax deductions) reduce the taxpayers’ total liability.
If the UK Government gives a tax break to a particular group of people or type of business, it reduces the amount of tax they would otherwise have to pay, or it changes the tax system in a way that benefits them for the best. And this is precisely what happened, thanks to the super-deduction tax break!
What is the new super-deduction tax break?
The super-deduction tax break has been recently announced to spur investments by providing 25p off company tax bills for every pound of qualifying spend on plant and machinery.
Most companies now believe that this scheme will bring forward business spending for 2 years and increase the number of investments across various industries, including manufacturing. According to the Office for Budget Responsibility (OBR), the new super-deduction tax break will raise the level of business investments by 10%, which translates into around £20bn/year. Effectively, the idea is that companies will be able to claim this deduction from their tax bill provided they invest in new plant and machinery for business purposes only. Under this super deduction, you are ultimately allowed a capital allowance of 130% on all your qualifying investments.
How can your business benefit from this new tax scheme?
There has never been a better time to start investing in pedestrian operated electric tugs like our MotorMovers!
Why? Not only will pedestrian electric tugs boost safer handling environments, but they will also greatly enhance staff productivity and increase efficiency. This is a fantastic opportunity for companies that want to make the most out of the many benefits that our electric tugs have to offer, especially within the pandemic context. For more information, head over to our article on the impacts of COVID-19 on the global supply chain and how electric tow tugs can help. The great news is that anything ranging from IT equipment to new solar panels to a factory production line or a new electric tow tug should be safely covered under the new tax deduction scheme.
However, an important thing to consider is that the tax scheme’s main benefit does not cover any equipment aimed for renting, and neither are structures or buildings included. The timeframe in which companies can get the most out of this super-deduction tax break is minimal due to the shock of the COVID-19 economic crisis. Businesses should focus on stimulating investments as soon as possible, especially as this scheme runs only from the 1st of April 2021 until the 21st of March 2023.
So, in that specific timeframe, any company investing in qualifying plant and machinery will be able to claim:
- A 130% super-deduction capital allowance
- A 50% first-year allowance for qualifying special rate assets
Specialists recommend, however, to be very careful with the disposal of the new assets before the end of the super-deduction scheme, as it may end up costing your business more in tax than you get deducted!
How to make the most out of the new tax scheme?
Every business will need a solid purchasing strategy, along with an excellent business planning method. This can be obtained primarily through record-keeping if you want to take advantage of the scheme without being seriously penalised later on for minor mistakes that can get overlooked.
Ensure you have a structured plan in place and that everything you’re going to purchase is eligible, and that you make the most of the tax savings covered by the super-deduction scheme by purchasing your MotorMover! We’ve also launched our brand new electric tow tug, called The Tow Major MotorMover, that you can find all about in our latest article. We introduce our 80.000 KG electric tow tug now available for purchase!
All our electric tow tugs are a lot more than the usual ‘off the shelf product line”, as our ongoing focus is to work alongside all our customers to provide them with our best material handling solutions possible. In case you would like to upgrade your business equipment, or if you just want to find out more about how MasterMover can find the best solution for your material handling needs, please get in touch with us today, or give us a quick call on 0116 232 8799, and one of our friendly team members will happily help you out with any questions you may have.
For more information about the new super-deduction tax break, please head over to the HMRC website.