Commercial property owners can still benefit from the capital allowances super deduction at 130%. Learn more on today’s article.
We will cover:
- The allowances available for commercial property owners
- The types of assets eligible for tax reclaims
Super deduction legislation
The super deduction is a tax incentive which began as a response to the pandemic to boost business investments.
Businesses with higher profits usually equal higher Corporation Tax, but also higher tax cuts following the super deduction. This way, the super deduction benefits the economy, and encourages productivity as well as investment.
With the incentive, businesses with higher profits can feel free to invest more as they claim back tax-deductible costs in their investments at a capital allowance deduction of 130%.
Super deduction allowance
The super deduction legislation is related to capital allowances.
Capital allowances are available for qualifying investments in plant and machinery which fall within the ‘main pool’ and can be deducted at 130%.
A 50% allowance is also available in the first year of making qualifying investments. This is called the First-Year Allowance (FYA).
Plant and machinery
More specifically, the company must incur in an expense for a qualifying activity, and purchase a qualifying asset that fills within the ‘plant and machinery’ category.
The assets will qualify for either the 130% super deduction or the 50% first year allowance.
This is determined by how the asset would have been treated had it not qualified for a 100% FYA, whether it would have been a main rate or special rate asset.
According to HMRC, “The rate of special rate first year allowance is 50%.
Special rate plant and machinery do not qualify for the super-deduction but may qualify for the 100% annual investment allowance.”
Learn more about the qualifying assets here.
What qualifies for the super deduction?
Most tangible capital assets used for a business are considered plant and machinery for the purposes of claiming capital allowances.
The kinds of assets which may qualify for either the super-deduction or the 50% FYA include, but are not limited to:
- Solar panels
- Computer equipment and servers
- Tractors, lorries, vans
- Ladders, drills, cranes
- Office chairs and desks
- Electric vehicle charge points
- Refrigeration units
- Foundry equipment
Super deduction capital allowances example:
A company incurring £1m of qualifying expenditure decides to claim the super-deduction.
Spending £1m on qualifying investments will mean the company can deduct £1.3m (130% of the initial investment) in computing its taxable profits.
Deducting £1.3m from taxable profits will save the company up to 19% of that – or £247,000 – on its corporation tax bill.
Wondering how much you can claim? You can access a super deduction calculator here.
Capital allowance claims are eligible for property owners if they are a sole trader, partnership or a company that continues to proceed with trade or are involved in the property letting business such as furnish holiday lettings (FHL).
At Tax Expert, the due diligence process we conduct is compliant with HMRC and structured in a way that allows our clients to maximise their tax refund. An estimation can be provided once we conduct a review and assessment of the property.
If you own a commercial property, you may entitled to claim the super deduction. Contact us to know more.
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