Super deduction scheme offers tax saving on more capital investments than you might realise

Has your company made use of the super deduction scheme yet?

It offers money off the tax bill on a wider range of capital investments than many realise, by allowing businesses to claim 130 per cent capital allowances on “qualifying plant and machinery investments”.

Capital allowances enable the cost of certain assets to be written off against taxable income when they are working out their taxable profits.

The government says it means companies cut their tax bill by up to 25p for every £1 they invest.

Cambridge-based office design, furniture suppliers and fit-out experts COEL and accounting firm Price Bailey have teamed up to explain how this works.

COEL notes that office furniture does qualify, including desks, chairs, meeting pods and storage units. Office equipment, including computers, laptops, printers, copiers, and servers, also qualifies.

The deduction also applies to other items deemed as plant and machinery, such as racking and shelving, solar panels and electric vehicle charging points, and commercial vehicles, including lorries and vans – but not company cars.

A firm spending £100,000 on new office furniture, for example, could claim a super deduction of £130,000 (130 per cent), amounting to a tax saving of £24,700 (at a corporation tax rate of 19 per cent).

Purchases have to be made by organisations that pay corporation tax, and the scheme is not available to private individuals or partnerships. Furniture and equipment purchased must be new and not second-hand, used or refurbished.

Gemma Thake, tax director at Price Bailey, said: “With the return to office and hybrid working patterns becoming a feature of modern working, most employers will be reviewing their office space and capital assets used by employees.

“Given the introduction of the super-deduction from April 1, 2021, there is an increased incentive for companies to invest in qualifying assets to take advantage of the additional allowances before the end date of March 31, 2023.

“For businesses affected by the Covid-19 pandemic, this is likely to be seen as a welcome form of tax saving over and above the annual investment allowance already available.

“It is also expected that the timing of the super-deduction will prevent some companies from delaying capital expenditure until April 2023 onwards when the rate of corporation tax has been confirmed to increase from 19 per cent to 25 per cent.”

The scheme comes as many companies consider how their future workspace will work.

Prof Michael Smets, in advice published online by the Said Business School at the University of Oxford, says: “Covid-19 has given us an opportunity to embrace new working practices. Our research shows by rethinking the role of the office we have a chance to spark greater creativity, diversity and productivity in our working lives.

“Our research shows the office need no longer be a space where work gets done, but instead will become a space where community is shared, where ideas are exchanged and where innovation and mentoring happens.”

More details about the super-deduction scheme are available at gov.uk/guidance/super-deduction.