Don’t miss out – do YOU qualify for a Super Deduction Capital Allowance?8th June 2021
Welcome to our Classeq Simplicity Series – a series that’s designed to present a straightforward, no-frills look at issues and opportunities that impact on our customers, our distribution partners and stakeholders across the Hospitality Industry.
In this, our first edition in the series, we take a look at the new Super Deduction Capital Allowance which the Government has recently launched to help boost the economy as we emerge from Covid-19.
The Government’s aim is to help us all ‘bounce-back’ and as hoped for, the early indicators are that the Hospitality Industry is indeed enjoying a very busy ‘bounce-back’. We know that consumer confidence is returning and all that pent up demand is being released – indeed, our phones are ringing ‘hot’ at the moment with customers looking to buy new warewashing equipment.
For many of us – just the word ‘tax’ fills us with fear, and navigating the formalities of HMRC can be a daunting prospect. But, do be aware that you could be missing out on claiming for benefits that can save you a worthwhile amount of money.
And, whilst we don’t pretend to be tax advisors, we wanted to highlight this potential opportunity for your business, as it’s easy to miss! Capital Allowance makes it a great time to invest in new equipment or bring your planned investment forwards. It’s certainly worth having!
It is undoubtedly worth taking a few minutes to check if you are eligible. The size of your business does not matter – you can be a £-multi-million operator or a small café. The scheme offers something for all, as long as you pay corporation tax.
What is a Capital Allowance?
Firstly, you may ask what is a Capital Allowance? Capital Allowances let taxpayers write off the cost of certain capital assets against taxable income. And kitchen equipment is firmly on the list! These Allowances take the place of accounting depreciation, which is not normally tax-deductible. However, you can now deduct Capital Allowances when computing your taxable profits.
The Super Deduction Capital Allowance scheme allows all businesses (that pay corporation tax), to claim a significant 130% first-year Capital Allowance for investment in new kit such as kitchen equipment. In fact, the HMRC refers to this as ‘plant and machinery’ (distracting us with visions of building sites and motorway maintenance) – but don’t worry, kitchen equipment is very much included in the case of foodservice operators.
If you are considering buying a new warewasher, a new oven or grill, new fridge or freezers – even a new computer – this Capital Allowance can make a real difference. 25% against investment outlay can mean £ thousands of pounds in tax reduction.
The Super Deduction Capital Allowance may sound complex. It’s actually quite straightforward and we hope this article will help you look in the right direction. Now we’ve shared the signposts, do talk to your accountants to get some further advice as to how you can ensure you are eligible for the Super Deduction Capital Allowance and include it in your company returns.
What is the Super Deduction Capital Allowance? Making it Easy…
Remember how the Government reduced Stamp Duty to keep the property market buoyant under Covid? It has worked well – the property market is stronger than ever!
And, the Super Deduction Capital Allowance scheme is similarly concepted and designed to help businesses accelerate their own recovery after the pandemic.
The scheme began on the 1st April 2021 and will remain in place until March 2023. During this two-year period, it enables you to claim a 130% first-year capital allowance for new machinery and equipment. Put simply, this means that for every £1 you invest in new machinery you will be allowed to cut your corporation tax bill by up to 25p.
If you are considering buying a new warewasher under the scheme; if you pay £1,000 for the machine, you will be able to deduct up to £250 from your tax bill. If you invest £5,000 in equipment, you will be able to deduct up to £1,250. Remember, there is no upper or lower limit.
A few things to be mindful of…
There is no minimum, or maximum, level of investment that you are required to make. It’s one of the reasons why the scheme is so attractive for both small and large businesses.
Nothing is forever! If you choose to sell or dispose of the asset before the end of the regime, you will need to keep track of what you have bought it for and what you have sold it for to avoid any confusion. Good record keeping will be important. Do check with your accountants!
If you have bought your equipment using finance, or hire purchase, you will need to check with your accountant as to what you can potentially claim. The current situation is that capital allowances can ONLY be claimed on payments made under the HP agreement once the asset has been brought into use and during the correct timeline for when the allowance is available.
Do you qualify?
In all likelihood – yes! All Foodservice businesses qualify for the scheme but please do check with your accountants to ensure you are eligible and that you’re paying corporation tax. They will be pleased to help you file the right documents.
Together, “many raindrops make an ocean” and it’s important for us all that we spread the word across as many operators as possible within the Hospitality Industry. We want to make them aware of the scheme’s existence in order to check their eligibility and ensure they can take advantage of this opportunity over the coming two years. At the end of the day, every penny counts as we all look to recover from the impact of Covid.
In the words of the Chancellor, Rikki Sunak:
“This Super Deduction Capital Allowance will give companies of all sizes a strong incentive to make additional investments and to bring planned investments forward”.
Let’s make the most of the scheme whilst it is available. Do talk to your accountant soon or raise this opportunity with your finance team. Don’t miss what could be a great boost to your bottom line.
Do check out full details of the scheme at: www.gov.uk/guidance/super-deduction