Equipment & Asset Finance – Capital Allowances

Equipment & Asset Finance – Capital Allowances Also known as the ‘super deduction‘, there is an increase in what companies can claim back against their corporation tax when purchasing new assets or equipment. Historically, companies could claim back the cost of new equipment and asset purchases as a P&L cost, meaning that their corporation tax […]

April 21st, 2021

Equipment & Asset Finance – Capital Allowances

Also known as the ‘super deduction‘, there is an increase in what companies can claim back against their corporation tax when purchasing new assets or equipment.

Historically, companies could claim back the cost of new equipment and asset purchases as a P&L cost, meaning that their corporation tax was reduced as a result.

Until March 2023 HMRC are allowing companies to claim 130% of the capital cost as a deduction against corporation tax.

What Does The 130% Allowance Mean?

If you buy a new piece of construction plant for £100,000
The capital expenditure x 130% equals a £130,000 deduction from taxable profits
Multiply this by the current rate of corporation tax (19%) and you get a £24,700 reduction in the company tax bill

This only applies to new assets, it is the Government’s way of incentivising companies to invest and expand as the economy gets back into gear.

As a guide, the 130% allowance could be used for:

Construction plant
Agricultural machinery
Tractor units
Trailers
HGVs and LGVs
Vans
CNC and other types of equipment

When planning on buying an asset then talk to your accountant first to ensure you are purchasing the equipment in the best way possible.

The full HM Treasury guide to what you can claim for using this scheme and what assets are available can be read here:ass

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Asset Finance Options & Equipment Finance Options

The standard options using the asset as security are;

Borrowing up to £2m
Secured by the asset
Repayment term up to 7 years
No minimum company turnover

In addition to the regular finance options the business can look to use standard unsecured lending (which can be quicker and work well with more unusual assets) or use the new Government Recovery Loan Scheme. Both of these offer an alternative that leaves the asset free from any charge by a lender and can remove the need for a personal guarantee.

Easier to Watch?

If you prefer to watch then the video below gives an overview of the capital allowance scheme and the ‘super deduction’, covering how it works and how it helps.

By Dave Farmer

David Farmer

Over 30 years finance experience. Former credit underwriter, founder of Lime Finance Solutions in 2012. Multi Award winning business, featured in Sunday Telegraph, Parliamentary Review, Sky TV and others. Regular contributor to press and business associations. FCA Authorised, ALIBF Qualified. Specialist in Commercial Mortgages, Business Lending, Property and Development Finance.