The increase in Corporation Tax to 25 per cent 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 per cent tax relief provided by the Super Deduction scheme, that was 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,” says Nigel Atherton, Managing Director, XYZ Machine Tools. For example, the purchase of a machine tool valued at £100,000 would generate tax relief of £130,000, at the old rate of Corporation Tax that would save the customer £24,700; with the tax rate at 25 per cent that saving increases to £32,500. If you kept the £100,000 of profit in the bank you 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 Corporation Tax and National Insurance did come as a blow. However, we have to look for the positives and, if in a position to re-invest profits back into the business the added incentive of the Super Deduction Scheme provides that silver lining.”
Leading from the front XYZ Machine Tools has continued to invest in its own business in order to maintain its levels of service to customers, whether through increasing the number of employees in customer facing roles or, continuing to provide its extensive range of machines, the vast majority of which are available ex-stock from its Burlescombe, Devon headquarters.
With HMRC’s Super Deduction Scheme providing enhanced tax relief on capital investment there has never been a better time to buy a new machine tool.
