budget

F

fred

Well-known member
the 130% plant purchases against tax is looking juicy


2.111 Super-deduction – From 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. This upfront super-deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive. Investing companies will also benefit from a 50% first-year allowance for qualifying special rate (including long life) assets.

and corp tax

Corporation Tax: 19% rate for profits up to £50,000, tapering to main rate of 25% for profits over £250,000, from April 2023
 
Gunners

Gunners

Well-known member
Sorry, 130% effectively means you get money back off your tax bill for spending it?
£10k digger would have given you £1900 off your tax bill? (19% of 10k)
Now gives you £2470 off? (30% of 1900 = 570 + 1900)

Have I got that right @fred ?
 
Gunners

Gunners

Well-known member
Might have completely misunderstood this.... Reading the BBC news website.....

However, Mr Sunak sought to temper the rise with an announcement of a "super-deduction" for companies when they invest, boosting the amount firms can offset against their tax bill.
He said that, for example, under existing rules, a construction firm buying £10m of new equipment could reduce its taxable income for the year by £2.6m, but with the "super-deduction", the company could reduce it by £13m.

So buy a £10k machine and offset £13k of tax! Ill never pay corp tax again - new machines every year!
 
Antony Holmes

Antony Holmes

Well-known member
That was my first thought, but I'm not sure it will work like that.
i am shore i can remember my dad talk about back in the sixtys he could get a new van instead of paying the tax man is this the same if so lots of new plant will be got next year
 
doobin

doobin

Well-known member
But you can already offset 100% of the machine cost under first year allowances? Up to the annual investment limit as I understand it.

So this is targeted at the big boys really, it's like raising the annual investment limit but on steroids.

Or have I got that wrong? This forum needs an acountant with a digger to fix!
 
D

DaveDCB

Well-known member
It’s all very well introducing this, but unless you have machines on order already the chances of you benefitting from this is rather slim, given most manufacturers lead times are early 2030... 🙄
 
F

fred

Well-known member
if you were ever to buy a lockup, building or yard then this allowance becomes very juicy indeed.
 
F

fred

Well-known member
Might have completely misunderstood this.... Reading the BBC news website.....

However, Mr Sunak sought to temper the rise with an announcement of a "super-deduction" for companies when they invest, boosting the amount firms can offset against their tax bill.
He said that, for example, under existing rules, a construction firm buying £10m of new equipment could reduce its taxable income for the year by £2.6m, but with the "super-deduction", the company could reduce it by £13m.

So buy a £10k machine and offset £13k of tax! Ill never pay corp tax again - new machines every year!

i dont think it works like that.

Buy £10k machine. With super deduction its value is now £13k. 19% of £13k means you get £2470 off the corp tax instead of £1900. I dont think its targeted at small firms as we already get £200k of annual investment allowance at 100% its for larger firms wanting to buy 50 machines etc.

For larger firms say buying a £300k item of plant, they can only claim 18% in the first year so for them its massive.

Saying that, its a massive potential if you have already own a yard and want to flip it into your pension ....
 
T whiting

T whiting

Well-known member
Initially I thought it was a good idea but then after thinking about it it'll make the big plant firms buy more kit to offset there profits and put it out for even less

It'll also make main contractors buy there own plant fleets to take advantage of it
 
F

fred

Well-known member
Yeah great announcement, just what I wanted a couple of months after I bought all new kit! 😡

get your mrs to form her own ltd co, lend this new co the money from your comp to buy all your kit as a massive uplift, your company buys it all back for less to take advantage of 130%.

Now you have another company making a loss to lose some tax on and it owes you money (which is paper only) that you can claim on from the other firm.

I didn't tell you that trick mind :devilish:
 
Pedrod355

Pedrod355

Active member
Seen some business’s saying you save 25p in every £ you spend, is this semi accurate ?
 
R

rossandson

Active member
Seen some business’s saying you save 25p in every £ you spend, is this semi accurate ?
Not quite.

Eg - buy a van for £10k - you currently reduce tax bill by £1900(£10kx19%)

New rules are - the van value is increased to £13K (£10k x 130%) and tax reduction would be £2470 (£13k x 19%)

So it’s Extra £570 on a £10k investment.
 
Pedrod355

Pedrod355

Active member
Got you! Cheers

Does the 130% only apply to brand new equipment?
 
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