Super-savings: While Covid has brought many challenges to both individuals and businesses, we’ve been looking specifically for the silver linings, and this is a big one (3-minute read).
As part of the Budget 2021 and COVID-19 recovery plan, the government announced the introduction of the super-deduction tax relief on plant and machinery investments.
This sounded like a great opportunity for large corporations and factories, but we’ve looked further into this and discovered that it covers many more organisations and a wide spectrum of equipment, including telecoms hardware.
What is the super-deduction?
Announced earlier this year, the super-deduction tax relief applies to “expenditure incurred from 1 April 2021 until the end of March 2023” and means “companies can claim 130% capital allowances on qualifying plant and machinery investments”.
This and the 50% first year allowance (see here for more detail), could enable investing companies to significantly lower their corporation tax bills. These benefits have been put in place to promote economic growth and incentivise additional business investments or bring forward planned expenditure.
Who can benefit?
This is open to businesses of all sizes, including SMEs, however, it does exclude partnerships, sole traders and other organisations not paying corporation tax.
What is a “qualifying plant or machinery investment”?
This is actually broader than it sounds and is defined as “most tangible capital assets used in the course of a business” for this purpose. The non-exhaustive list published states the following kinds of qualifying assets:
- Solar panels
- Computer equipment and servers
- Tractors, lorries, vans
- Ladders, drills, cranes
- Office chairs and desks,
- Electric vehicle charge points
- Refrigeration units
- Foundry equipment
As frequently grouped, IT and Telecoms purchases come under “Computer equipment and servers”, meaning telephony hardware (PBX, handsets etc.) would count as a qualifying expense.
How does this translate for a telecoms purchase?
For ease of illustration, let’s assume the telephony hardware you are set to purchase as part of your new solution would cost your company £10,000:
- Spending £10,000 on qualifying investments will mean you can deduct £13,000 (130% of the initial investment) when calculating your taxable profits.
- This will save you up to 19% of that (equating to £2,470) on your corporation tax bill.
Not only will you benefit from the tax relief by purchasing this equipment upfront, you will also lower your monthly costs for the duration of your contract.
When can I take advantage of this?
The four new capital allowance measures are already in place and will remain so for qualifying expenditure on plant and machinery up to and including 31st March 2023.
With all businesses required to upgrade to an all-IP solution ahead of the 2025 PSTN Switch Off, this could be the perfect time to make the change; avoid the anticipated rush ahead of the deadline whilst taking advantage of the tax relief and lowering your operating expenses moving forward.
We’re able to structure contracts for brand new telephony systems around this tax benefit, meaning you’ll get the best solution for your business requirements and the best value for your outlay.
Our Business Development Managers are available to review your requirements and design a solution to maximise your benefit from the capital allowance measures.