What does super deduction tax allowance mean for your business?
Posted on 5th March 2021 at 14:44
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 my business?
This is excellent news for optical practices wishing to invest in equipment, shopfit and technology. Assets funded by a lease do not qualify for capital allowances, but we are happy to discuss others means of funding with you.
Example 1 - £25,000 investment. 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 practices, trading as Ltd Companies, wishing to invest in
equipment, shop-fit and technology.
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 who are experts in medical funding.
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