By Laura Day 28/04/2021

The impossible of 2020 is slowly becoming possible in 2021. This year UK SMEs are looking forward to a future of economic recovery and opportunity. There are various UK Government schemes and incentives that can help SMEs to restart, recover, and grow as lockdown restrictions are gradually coming to an end.

If you thought that Rishi Sunaks’s budget tax break was just for big businesses, you are wrong! As of the 1st April 2021, SMEs can take advantage of the Super Deductions scheme and claim back 130% first-year allowances on new assets purchased with Asset Finance.

At first the use of the expression “plant and machinery” caused the confusion that it was just for factories. Anything ranging from IT equipment to new solar panels to a factory production line or new fork lift truck is covered. Under the super deduction, companies are allowed a capital allowance of 130% on your qualifying “plant and machinery” investments with the ability to claim a deduction from their tax bill if they invest in new plant and machinery for their business. There are some exclusions to the incentive:

  • Businesses that lease the use of the equipment such as landlords i.e., air-conditioning for a leased building space.
  • Partnerships such as accountants, lawyers or architects, and sole traders and other businesses not paying corporation tax.

How it works!

If a business spends £500,000 on equipment via asset finance it can theoretically utilise a £650,000 allowance against the company’s taxable profits. Based on the current corporation tax rate of 19%, this could result in a £123,500 saving on the company’s tax bill. Not an insignificant amount!

Of course, companies should get their own tax advice about the specific benefits of the scheme and how it will affect them.

Sadly, it won’t last forever, there is a very limited timeframe to try and stimulate investment until 31st March 2023.

Don’t delay thinking about investment via asset finance – not only are you preserving cash reserves by spreading the cost of the investment you will be saving huge amounts of money in tax – please call to discuss further!

We are Primary Asset Finance and we focus on funding SMEs.

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