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‘Sting in the Tail’ for New Super Deduction on Equipment

In the Budget on 3rd March, the Chancellor announced a new 130% tax relief for expenditure on new plant and machinery incurred between 1st April 2021 and 31st March 2023.

However, it now transpires that this tax relief is only available to limited companies, with the latest Finance Bill revealing a nasty ‘sting in the tail’ when the equipment is sold, as the clawback on disposal is potentially at the same 130% rate. An example would be as follows:

  • Buy equipment at £100,000 and deduct £130,000 from taxable profits, saving £24,700 in corporation tax at 19%
  • From 1st April 2023, sell the same equipment on for £80,000, with £104,000 added to taxable profits at the new corporation tax rate of 25%, resulting in up to £26,000 tax

The clawback reduces over time from 1st April 2023, so it is advisable to retain the asset long-term.

If you require any advice on capital investments, please don’t hesitate to contact us on 01384 376964

Matthew Morris

Matthew Morris

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Folkes Worton – Accounting for the Future