Capital Allowance for Plant & Machinery in 2021

Rishi Sunak’s March budget provided a shot in the arm for UK business that may yet rival the obvious one of the successful vaccine rollout. His so-called “Super-deduction” will allow UK companies to claim capital allowances of 130% on ALL new plant and machinery.

This incentive has never been needed more. Investment levels by UK businesses continued to fall by a further 11.6% between Q3 2019 and Q3 2020. Most economists predict that our post-pandemic recovery will be sluggish if we cannot improve the UK disease of poor productivity levels. It still takes a worker in the UK five days to make something which the equivalent German worker can make in four. Rishi sees the problem and has made his generous give away conditional on tight time constraints. 

So, the time to invest is now; it is not the moment to put off that capital expenditure. Our range of world-class labelling machines – which meet the demands of your business’s requirements in terms of speed and quality at up to 400 labels per minute – plug that productivity gap and significantly reduce your costs.

How Super is Rishi’s Super deduction?

The deduction will allow your business to claim capital allowances of 130% in year one for money spent on that new labelling machine. Previously, you had two options: to claim 19% on 100% in year one, or 19% of 18% each year. So, he is effectively giving you a 5.7% discount. That should make the finance director smile.

As an additional sweetener, long-life assets such as our machines qualify for a 50% first-year rate deduction (which would otherwise receive a 6% annual WDA). This would mean a £50,000 deduction for every relevant £100,000 that is spent. This super-deduction significantly increases the total deductions that your business can claim. This will reduce the amount of tax you pay on profits – what’s not to like!

What the Capital Allowance means in practice?

Invest £100,000 of qualifying expenditure & claim the super-deduction.

Spending £100,000 on a new labelling machine means a deduction of £130,000 (130% of the initial investment)

Now for the giveaway – calculating the taxable profit a deduction of £130,000 from taxable profits will be 19% or a tax cut of £24,700 versus last year’s equivalent of £19,000

OR

Invest £25,000 of qualifying expenditure & claim the super-deduction.

Spending £25,000 on a new labelling machine means a year 1 deduction of £32,500 (130% of the initial investment)

Now for the giveaway – calculating the taxable profit a deduction of £32,500 from taxable profits will be 19% or a tax cut of £6,175 versus last year’s equivalent of £4,750

What’s more, the temporary increase in the annual investment allowance has been extended. It will remain available to claim for up to £1 million of qualifying expenditure incurred until 31 December 2021. That’s not long.

There are a couple of caveats. The super-deduction applies to expenditure on new plant and machinery, not second hand or gifts.

When can I Claim the Capital Allowance?

Finally, the capital allowance super-deduction isn’t a permanent concession. To qualify, you need to have made a payment to us, not just placed an order, (applies only on contracts signed 1 April 2021 and 31 March 2023). So timing is of the essence. The clock is ticking.

Please click here to enquire today and we will be delighted to demonstrate how our new machines will kickstart your businesses productivity improvement while saving money to the bottom line.

View our wide range of machinery in the video below.

 

 

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