Are you taking advantage of your tax-free corporate investment allowances?
In order for your business to stay ahead in its sector, you must keep up with the constantly evolving industry by investing in new machinery and innovation.
While this may seem like a significant expense, the long-term benefits will outweigh the costs, and a range of tax reliefs are available to your business to help you.
Capital allowances:
When purchasing new machinery, capital allowances can be beneficial as they can reduce the amount of Corporation Tax you need to pay.
The Annual Investment Allowance (AIA) allows for the deduction of 100 per cent of eligible plant or machinery costs from your business’s profits. It is worth noting that this allowance is permanently set at £1 million per annum.
Super Deduction
Until 31st March 2023, companies can still benefit from a super-deduction of 130 per cent on most new plant and machinery investments that qualify for main rate writing down allowances.
They can also use a first-year allowance of 50 per cent on most new plant and machinery investments that qualify for special rate writing down allowances.
Plant and machinery are tangible assets used in a business’s day-to-day operations, such as office furniture, refrigeration units, solar panels, and compressors.
However, the acquisition of company cars is excluded. To qualify for the relief, assets must be new and not second-hand or refurbished.
For example, a company that spends £1 million on qualifying investments and claims the super-deduction can deduct £1.3 million (130 per cent of the initial investment) from its taxable profits.
Be quick though as this relief will end on 31st March 2023.
Enhanced Capital Allowances:
If your projects are environmentally friendly, you may be eligible for enhanced Capital Allowances. This first-year allowance is only applicable to new and unused machinery and equipment. Additionally, you can claim this allowance on top of the AIA, which allows for the deduction of the full cost of the equipment from your business’s profits.
Writing Down Allowances:
In cases where you have already claimed AIA on items totalling more than the AIA amount or the new asset does not qualify for AIA, you may be eligible for writing down allowances.
These tax allowances permit you to deduct a percentage of the item’s value from your profits each year.
However, the percentage you can deduct varies depending on the asset, so it is advisable to seek professional guidance before making a claim.
If you need advice on any of these allowances, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494 552100.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 21 March 2023.