The ‘super-deduction’ tax incentive
The UK Government have introduced a new scheme in accordance with the Annual Investment Allowance. The ‘super-deduction’ tax incentive began on April 1st 2021 and will run until 31st March 2023. Manufacturing firms willing to invest in plant and machinery assets now have a three-year window of opportunity whereby they can make particularly lucrative investments. This works by allowing firms to claim a 130% capital allowance on qualifying plant and machinery investments. For example, a purchase of equipment worth £10,000 means a deduction of £13,000, saving up to 25 pence on tax bills for every pound invested. By doing this, manufacturers can deduct the cost of capital investments when calculating taxable profits, which is not normally possible.
The aim of this scheme is to support businesses following the COVID pandemic and allow manufacturers to invest in productivity-enhancing assets. By opting for equipment on the Governments Energy Technology List (ETL) of high performing assets, manufacturers can reduce emissions, lower energy bills and shorten investment payback periods.
In April, Make UK released the results from a survey conducted in March 2021. These results provide an indication of how various firms may approach the ’Super-deduction’ scheme:
- Approximately 23% of organisations said that the super-deduction tax incentive would directly result in increased investment.
- Approximately 28% said that they would consider investment plans in response to the super-deduction.
- Approximately 49% said that the super-deduction would not impact future investment plans.
- Approximately 32% said that the super-deduction was the most impactful component of the 2021 budget.
In addition to these findings, nearly 20% of manufacturers viewed the 2021 budget positively, while only 3.4% had negative views. This was especially true among mid-sized and large companies.
Which plant and machinery investments qualify for The Government Manufacturing Scheme?
A variety of core equipment will qualify for the super-deduction tax, including but not limited to:
- Manufacturing equipment
- Solar panels
- Computer equipment
Equipment provided by a landlord or leased is exempt, along with any equipment purchased before 1st April 2021. Due diligence is important before making any investment decisions if you need to qualify for the deduction.
Were you aware of the super-deduction scheme? Familiarising yourself with this opportunity could greatly benefit you, your company and any planned or proposed investments you have. Click here to read the Super-deduction fact sheet.
Contact us on 01606 532560 to discuss insuring your plant and machinery or for any other insurance enquiries.