The increase in Corporation Tax to 25% was met with obvious dismay from across industry, but for those that want or need to invest in new capital equipment the rise has a silver lining. The first-year 130% tax relief provided by the Super Deduction scheme, introduced in April 2021, now provides a bigger incentive to re-invest in your business.
The Super Deduction can be applied to any new equipment with unlimited value whether bought outright or on finance. “When applied to the new Corporation Tax rate customers can make significant savings on new machine tools,” commented Nigel Atherton, managing director of XYZ Machine Tools.
“For example, the purchase of a machine tool valued at £100,000 would generate tax relief of £130,000 which at the old rate of Corporation Tax would save the customer £24,700. With the tax rate at 25%, that saving increases to £32,500. If you kept the £100,000 of profit in the bank it would cost you £25,000 in tax instead.
“The manufacturing sector has proved to be extremely resilient throughout and post-lockdowns, therefore the announcement of increases in Corporation Tax and National Insurance did come as a blow,” he added. “However, we have to look for the positives and, if you are in a position to re-invest profits back into the business the added incentive of the Super Deduction Scheme provides that silver lining.”
XYZ Machine Tools