As part of the Chancellor’s 2021 budget, he announced the Super Deduction Tax Scheme, which offers a 130% tax allowance on qualifying capital purchases. This is clearly good news for businesses looking to invest in assets, as Covid-19 restrictions are being lifted.
What role does it play in office fit-outs and furniture?
Buying furniture or equipment through cash might be a good choice if a company has excess cash. However, there is the argument that investing cash in depreciating assets isn’t the most cost-effective use of your excess cash, which may offer a greater return if invested in other business needs.
For those that do not have the cash, lease-purchase agreements are an option as they give the company a 130% tax allowance for qualifying assets, like furniture and AV. Or another option for a business without the cash is a lease rental for the non-qualifying proportion of the fit-out gives them a 100% allowance on the monthly rentals.
How does the super-deduction tax break work?
Businesses can claim back 130% of the costs of new (or first-year) business equipment against their taxable profits through the super-deduction tax break between now and the end of March 2023.
These deductions will apply as follows:
- An allowance of 130% of the cost of any qualifying business purchase that would ordinarily be capitalized at main rate
- 50% of the cost of qualifying plant and machinery which would normally incur special rate capital allowances.
Business owners can deduct 130% (£13,300) of the amount they spend on qualifying equipment from their taxable profits. As a result, your business would save 19.0% (£2,470) of that amount from your tax bill.
Are you eligible?
Small and large companies can apply for the scheme. The only main exclusions are:
- Partnerships such as accountants, lawyers, or architects
- Sole traders
- Companies that do not pay corporation tax
Which capital purchases qualify for a tax deduction?
The majority of tangible capital assets used by a business can be claimed.
In the budget announcement, the Government has not provided an exhaustive list of what it calls ‘plant and machinery assets,’ but it has provided examples:
- Office Furniture
- Solar panels
- Computer equipment and servers
- Electric vehicle charge points
What doesn’t qualify?
- Used and preowned equipment
- Cars for personal use
- Assets leased out or to assets hired out
At Sagal we don’t pretend to provide finance, our business is furniture, but we do have great partners who we can introduce you to so you can get the advice you need to make a considered decision.