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There’s no doubt, not many of us would want to be in Rishi Sunak’s shoes as he delivered his second budget this week, following a year of what can only be described as political and economical carnage. With a delicate balance to strike between paying back the colossal borrowing and keeping a buoyant economy to protect jobs and livelihoods, Mr Sunak’s budget has focused on corporation tax, Capital Gains Tax and inheritance tax, but with a range of incentives for business owners to encourage growth and investment.
Investing in new assets and capital equipment is a key part of the economic recovery plan, with the introduction of a radical ‘super-deduction’ of 130% when businesses invest in new plant and machinery.
In essence, if a business invests £100,000 in a new piece of plant or machinery, they are able reduce their taxable business profits by up to 130% of the investment cost. Essentially you will liable for a smaller tax bill because of the investments you have made.
These changes will come into effect from 1 April 2021 and will run for two years. If you’re looking to invest in new plant or machinery, you may be wise to wait until the new tax year so that you can benefit from the enhanced tax allowances that the ‘super-deduction’ brings, therefore reducing your tax bill. As always, we recommend you speak to your Accountant to ensure that you time the purchase of business assets to gain maximum taxable benefit.
Cars for business use are excluded from the ‘super-deduction.’ The scheme needs to focus on initiatives to enhance the development and growth of the business, so cars as a ‘non-essential’ business expense won’t qualify for this deduction.
Andy Wise, Managing Director of TVAF suggests that businesses need to focus on getting cash-flow fit:
“Cash-flow is at the heart of every business and there’s no doubt about it, your profits will be impacted by the increase in tax rates. You can prepare for this by looking at your projected forecasts and setting the money aside for the increase in corporation tax so that it’s budgeted for in two years time.”
“However, there is a huge opportunity for businesses to grow and the ‘super-deductions’ mean businesses can scale and grow by financing the assets they need within the next two years. If you’ve been thinking about investing in new plant and machinery, then getting this in place from April is a brilliant move. Many of our clients have been busier than ever during the pandemic, so need to replace their equipment whether that’s due to age or because of increased demand. The new tax year is definitely the time to contact the TVAF team to find out more about how asset finance can support your business.”
If you’re looking to set up a new manufacturing plant or facility, then looking at the eight locations designated as “freeports” around England which benefit from generous tax breaks if you set up there could be a brilliant solution. If you’re looking to relocate, you can benefit from Stamp Duty Land Tax exemption, 100% first year allowances on plant and a 10% per annum structures and buildings allowance.
This was expected, although employers will be required to make contributions to their employee’s salaries. This move is intended to protect jobs and provide employers with a safety net so that they don’t have to make redundancies before the world has fully opened up.
Support has been extended to sole traders who were previously excluded from support because their business started up in the 2019/20 tax year. This will help-out an estimated 600,000 businesses, however the directors of Limited Companies remain excluded from any government support, except the various loan schemes.
If your business made losses in previous years (possibly due to COVID), then you can receive tax relief on those losses too.
Businesses forced to close due to the Coronavirus lockdown will be eligible to apply for grants of up to £18,000 depending upon the rateable value of their business premises. Pubs, restaurants, hotels, gyms and hairdressers will be eligible for a grant of up to £18,000 per premises whilst non-essential retail businesses will be eligible to apply for a grant up to a maximum of £6,000.
The Conservatives manifesto stated that they won’t raise income tax, VAT or National Insurance, so the hole in government finances will be plugged by increases in corporation tax, Capital Gains Tax and inheritance tax. What does this mean for UK businesses?
If you want to know more about how you can benefit from the opportunities that the 2021 Chancellor’s Budget can provide, in particular how you can maximise the tax efficiencies for plant and machinery investments, get in touch with the TVAF team on 01635 785 400 or Contact Us to arrange a callback.