Super-deduction and Hire Purchase
In March 2021, the Chancellor announced in the budget a new “Super Deduction” Annual Investment Allowance. This means that from April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim: a 130% super-deduction capital allowance on qualifying plant and machinery investments a 50% first-year allowance for qualifying special rate assets.
Example of “Super Deduction”
• Equipment cost of £50,000 x
• Super Deduction of 130% x
• Corporation tax rate of 19% =
• Tax Saving of £12,350
The use of a Hire Purchase facility enables businesses to spread the initial cost of purchasing new equipment over several years with fixed monthly payments. A Hire Purchase facility qualifies as eligible to claim under the Annual Investment Allowance. This means that a business utilising a Hire Purchase Facility can spread the initial cost of investment and free up cashflow, whilst also allowing the business the benefit from tax allowances and also benefiting from offsetting the interest charges on the finance facility against their corporation tax bill.
Therefore the combination of the new Super Deduction Annual Investment Allowance, alongside the use of a Hire Purchase facility, will benefit a business hugely for tax purposes as well as cashflow retention.
For further guidance and reading on the Super Deduction Annual Investment Allowance, please visit the gov website here
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