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Super-Deduction and Other Temporary First-Year Capital Allowances

30 - 11 - 2021

The Autumn Budget in October 2021 introduced some new levels of capital allowance. The aim is to help business to rebuild and invest following the Covid-19 Pandemic.

What are Capital Allowances?

 

Capital allowances are the standardised tax allowable expense which is permitted when writing off an asset in the tax accounts of a business. A business can choose whatever depreciation rate it believes is realistic to write off an assets value in the accounts but these depreciation expenses are not allowable for tax purposes. Instead HMRC’s capital allowance rates are applied.

 

What are the new Capital Allowances?

 

The two new capital allowances introduced are:

•        A 130% first year capital allowance for qualifying plant and machinery assets;
• .       A 50% first year allowance for qualifying special rate assets.

 

For what period are these new allowances available?

 

The new allowances are available for assets purchased between 01 April 2021 and 31 March 2023 for companies.

 

What if I bought assets before 01 April 2021?

 

If you entered into a contract for the purchase of an asset before 03 March 2021 then the asset will not qualify for the new allowances.

 

Who can claim these allowances?

 

Only limited companies within the charge to corporation tax can claim. Individuals and Partnerships are not eligible.

 

What Plant and Machinery qualifies for the new Capital Allowances?

 

Only new plant and machinery will be eligible. Used and second hand assets will not be eligible for the allowances.

Most tangible assets used in the course of business are considered plant and machinery for the purposes of claiming capital allowances. Examples of the kinds of assets are:

•          Computer Equipment;
•         Office furniture;
•          Tractors, lorries and vans;
•          Solar panels;
•         Electric Vehicle charge points;

Please note that this is not an all encompassing list. Do not hesitate to ask for advice if you are buying any assets.

 

How do I claim the extra allowances?

 

The additional capital allowances will be claimed when calculating the company corporation tax liability for the year. Foremans ensure that all clients claim the maximum allowances available to a client and will do this automatically when calculating the relevant corporation tax liabilities.

 

If you would like to discuss any of the issues noted above or need an estimate of a particular vehicles Benefit In Kind value please contact us on:

 

contactus@foremansllp.com                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

Whilst all due care and attention has been taken in the preparation of these notes no liability can be accepted for any omission or item contained therein.  Foremans LLP                                                                                                                                                                                                                                    October 2021

 

 

 

 

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Fixed Data

Assumptions

General                                                                                                                              

• The user is over 21 and subject to tax in the UK
• The user wishes to minimise their tax liability
• The user is subject to national insurance i.e.he/she is not over retirement age
• Only current tax rates and limits are applied
• No tax mitigation payments are made e.g. pension contributions
• Only 3 digit letter 'L' tax codes shown in the drop down list can be entered 
• The user does not have a turnover greater than £100,000 where fewer reliefs and or higher taxes may apply

Expenses

• All miles claimed as expenses are for business use using a personally owned car or van
• All other expenses claimed are wholly, necessarily and where appropriate exclusively for the benefit of the business

Foremans LLP Charges

• Foremans fees associated with Limited Company, Sole Trader or Umbrella are as per published rates
• Foremans current Service Costs are allowed for in all calculations.

Holiday Pay

• Holiday pay is accumulated week by week by Umbrella or Agency employer but paid out during the year

VAT

• Limited Company or Sole Trader will be VAT registered
• Limited Company or Sole Trader will take advantage of Flat rate VAT
• Flat rate applied includes the benefit of the additional 1% applicable to the first year of VAT registration

Limited Company Conditions

• One director / one shareholder in a Personal Service Company
• Director of Personal Service Company elects to vote for 100% dividend after salary, costs and expenses
• Director's salary is maximum salary to the primary threshold for NI
• The Limited Company is trading normally i.e it is not subject to IR35 and is not a Managed Service Company

NOTES

• The Current tax rates are taken from the Fixed Data Table
• The current Value Added Tax Rate is 20% and is applied to all invoices and expenses as appropriate
• The Director's Salary is fixed in relation to National Insurance thresholds. Higher Rate Taxpayers should consider the advantages and disadvantages of a larger annual salary or bonus
• Higher Rate Taxpayers may wish to consider the advantages and disadvantages of shared ownership of their business
• Users with a tax code other than three digits and letter "L" may telephone or email our Development Department to request a detailed calculation
• Generally the use of an Umbrella rather than an Agency payroll is only efficient if sufficient weekly expenses are allowable and claimed
• The expenses claimed under an Umbrella should not prevent the proper operation of National Minimum Wage