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Chancellor of the Exchequer, Rishi Sunak, announced the new 2021 Budget to the nation on Wednesday 3rd of March 2021. Whilst not much has changed for tax paying individuals, with personal income tax being frozen until 2025/26, businesses are set to embrace much bigger changes.
The super deductions allowance that was announced by Chancellor Sunak paves the way for huge amounts of business investment. There has never been a better time to invest in your business’s resources.
The 2021 Budget stood out as a record-breaking opportunity for businesses in the UK to reduce their corporation tax bill by up to 130% of any investment that they make in the next two years, including investment in new machinery such as air compressors. This is a significant cash windfall for any business and will help to bolster cash flow during these critical months as we start to ease out of the COVID-19 pandemic.
In the budget outline on March 3rd 2021, the Chancellor explained that the Government is committed to continual investment in the UK and UK-based business. This is what has prompted the introduction of the super deductions scheme, as new incentives to boost capital expenditure are announced.
The biggest announcement to come out of this year’s budget is the incredible increase in super deductions available on taxable allowances. Put simply, this means that for purchases and expenditure that qualifying business owners make between 1st April 2021 and 31st March 2023, the business can claim back 130% capital allowance.
Under this scheme, for every one pound spent or invested by a qualifying British business in their own business resources, their taxes will be cut by up to 25p. This is a huge saving and presents a fantastic opportunity for British businesses to invest in their business and infrastructure.
Since the start of the COVID-19 pandemic, business investments have fallen dramatically by 11.6% between Q3 2019 and Q3 2020. This means that a large portion of UK based businesses have opted to not invest in any new plant or machinery solutions during the pandemic.
Capital allowances is the allowance of tax that a tax paying business can write-off against their taxable income. This means that the 130% super deduction is a generous way for many businesses to benefit from capital tax allowances into new plant and machinery assets, such as air compressors.
By making the investment in new plant and machinery assets such as air compressor units now, any tax paying business will be able to lower their corporation tax bill considerably at the end of the financial year.
Anything that is considered plant or machinery equipment can be off-set against your corporation tax bill with the 130% super deduction. This includes:
As a working example, say your business invests in a new HPC air compressor costing £10,000, you will now be able to deduct £13,000 from your tax bill. This means, your accounts team can deduct 130% of your initial investment (£10,000) when computing your businesses taxable profits. This will, in turn, save you a small fortune on your tax bill and bolster your cash flow.
Michael Douglas, Managing Director of Glaston Compressor Services praised the new Super Deduction scheme, stating: “This new ‘super deduction’ represents an increased temporary tax relief for companies who invest in new air compressors and ancillary equipment from April 2021.
This measure will allow a temporary first-year allowance; including a super-deduction of 130 percent on most new compressors and ancillary equipment which will allow our customers to invest in the latest energy efficient technology whilst enjoying the benefits of a substantial tax break to support long term productivity increases in UK industry.
New HPC KAESER compressors will provide more air for less cost and this new tax break represents the ideal time to upgrade an essential manufacturing component to give the best long term returns on your investment
The super deduction will also cover compressor controls so you may have great compressors but without the correct control are you getting the most from your system?”
There really has never been a better time to look to improve your on-site facilities by investing in new compressed air solutions. Here at Glaston Compressor Services, we can design and install a comprehensive air compressor solution or nitrogen generator to suit a range of industrial applications, all of which can take advantage of the super deduction scheme.
Speak to our team of expert engineers who will be able to advise you on the best and most efficient air compressor or nitrogen generator solution to your application problem. Call us on +44 (0) 1695 510 10 or email email@example.com.