What does super-deduction tax allowance mean for optical practices?
Posted on 5th March 2021 at 14:21
Recently announced in the latest spring budget 2021 from Rishi Sunak
What is it?
For purchases between 1 April 2021 until 31 March 2023, companies that pay corporation tax will be eligible to offset 130% of the asset value against their taxable profit in the first year.
What does this mean for optical practices?
This is excellent news for optical practices wishing to invest in equipment, shop fit and technology. Assets funded by a lease do not qualify for capital allowances, but we are happy to discuss other means of funding with you.
Example 1- OCT purchase. Asset (net) cost: £25,000 Tax relief with super-deduction: £6,175 (previously £4,750) This is calculated as follows: £25,000 x 130% x 19% = £6,175 which equates to 24.7p tax relief for every £1 investment. Example 2 - £50,000 investment. Asset (net) cost: £50,000 Tax relief with super-deduction: £12,350 (previously £9,500) This is calculated as follows: £50,000 x 130% x 19% = £12,350 which equates to 24.7p tax relief for every £1 investment.
Super-deduction key point summary:
Eligible for expenditure incurred between 1st April 2021 and 31st March 2023
Relevant for companies that pay corporation tax but not sole traders, partnerships, or LLPs (for these, the £1m AIA is still available until 31st December 2021)
Assets must be new, that is not second hand or used
130% Super-deduction capital allowance is available on all qualifying plant and machinery investments that fall within the AIA
Great news for optical practices, trading as Ltd Companies, wishing to invest in
equipment, shop-fit and technology.
Small to medium practices need to be aware of VAT de-minimis and funding via a lease as traditional leasing is not eligible for the super-deduction.
Whilst assets acquired under a lease are not eligible for the super-deduction, other forms of asset finance such as Loans, Hire Purchase and Long Funding Leases* are available
*Subject to clarification from HMRC
For further details:
Speak to your dedicated account manager from Performance Finance to discuss super-deduction further.
Tagged as: Annual Investment Allowance, Optical Finance, Optical Tax, Optical Tax Relief, super-deduction, super-deduction tax
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