Rishi Sunak has announced that whilst the UK corporation tax rate will rise to 25% from April 2023, a temporary 'super-deduction' of up to 130% will be available to encourage investment in new plant and machinery, describing the move as “the biggest business tax cut in modern British history”.
What qualifies as plant and machinery?Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances, this includes large format displays for meeting rooms like Clevertouch, or SMART Conferencing systems like Logitch,Poly, Nureva audio solutions and workplace management systems such as EntrySign, and GoBright which all have hardware elements.
What does this mean for your business?A company incurring £1m of qualifying expenditure can decide to claim the super-deduction. By spending £1m on qualifying investments, the company can deduct £1.3m (130% of the initial investment) in computing its taxable profits. By doing this the company will save up to 19% of that – or £247,000 – on its corporation tax bill.
What are capital allowances?Capital allowances let taxpayers write off the cost of certain capital assets against taxable income. They take the place of accounting depreciation, which is not normally tax-deductible.
Businesses deduct capital allowances when computing their taxable profits. In translating its accounting profits into taxable profits, a business is usually required to ‘add back’ any depreciation but, can instead deduct capital allowances.
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