Super deduction capital allowances – what it means for you

Earlier this month on 3rd March 2021, the UK tuned into the new Budget where Chancellor of the Exchequer Rishi Sunak laid out our financial roadmap for the year ahead. Of the various support given to buoy capital spend by businesses, the ‘super deduction capital allowances’ stood out.

In the hope of kickstarting investment and business growth post-pandemic, super-deduction will allow companies to claim a 130% first year allowance (FYA) for investments into items of plant and machinery acquired between 1st April 2021 and 31st March 2023.

This article is going to explain what super dedication capital allowances means for you in the context of spray booths and the automotive, industrial, commercial and aerospace industries. Continue reading for more.

Super deduction need-to-knows

What is covered under plant and machinery?

So, from 1st April 2021 to 31st March 2023, companies can claim 130% FYA to help with and encourage investment in main rate pool plant and machinery. But what does that specifically mean?

Well, it includes more obvious examples of plant and machinery like manufacturing equipment, machines, computers and the bigger items of machinery that are built into properties. One example, of course, is spray booths along with other paint finishing essentials such as paint mixing rooms and cure ovens. Conveyors and automated paint systems would also be applicable. Not forgetting services, like compressors with air ring mains or dust extraction turbines.

Investing in spray booths and spray booth equipment
With the super reduction capital allowances, you can upgrade your current spraybooth booth setup or, if required, invest in a new booth altogether.

You will be even happier to hear that alongside the 130% FYA is an additional 50% FYA for expenditure on special rate pool items of plant or machinery. This includes integral or additional features/equipment. Get in touch for more information on the eligible Junair equipment.

Other conditions to keep in mind

  • Both allowances apply only to companies who pay corporation tax.
  • The 130% super deduction and 50% FYA apply only to plant and machinery that is new and unused.
  • The 130% super deduction and 50% FYA do not apply to second-hand plant and machinery.
  • The relief is in accordance with accounting periods that straddle 1st April 2021 and 31st March 2023.
  • There is no expenditure limit on either the 130% super deduction or 50% FYA.

There are also some exclusions

While both the super deduction and FYA are generous as tax and business growth incentives, there are some exclusions that you should keep in mind in case they apply to your business.

  • Both allowances are only available to companies, not sole traders, LLPs or partnerships.
  • Both allowances are also only available for contracts entered into after 3 March 2021. Any projects that have already been committed to before or during the course of the pandemic, and that may have been mothballed only to receive the allowances, will not qualify.
  • The allowances are not available to landlords who are investing in the construction of new property or the refurbishment of existing premises.
  • Cars are excluded. However, vehicles that are not deemed cars are eligible (i.e vans, motorbikes, generally any vehicle used for trading purposes that is not a car).

‘Capital allowance pools’ explained

If you’ve done even the slightest bit of research into the above and you’re weighing up its benefits for your business, you’ll have come across ‘pools’ that are essentially a way to categorise a business’ government allowance potential.

Here, we’re going to define which pools relate to which goods so that you can make a clearer and more informed decision.

The three types of pools and their qualifying allowance rates are:

  • Main rate pool with a rate of 18% (all plant and machinery)
  • Special rate pool with a rate of 6% (additional assets that would be considered integral to the building like lifts, air conditioning, solar panels etc; items with a long life; thermal insulation of buildings.
  • Single asset pools with a rate of 18% or 6% depending on the item (items you use outside the business, for example).

We can help advise on the above during the purchase process, so you won’t have to worry about the specifics too much at this stage.

Invest in your business growth with super deduction relief

It’s clear that business growth is being prioritised to aid the economic recovery of the UK, and the above allowances should go a long way to help the economy and also drive the expansion of your company.

For more information, please get in touch and we can provide further guidance on the allowances.

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