There's never been a better time to invest in IT Infrastructure

The Super Deduction - Don't miss the chance

• For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery (in IT terms: Computer Hardware and Servers and software required) investments.
  
• Under the super-deduction, for every pound a company invests, their taxes are cut by up to 25p.
• This change makes the UK’s capital allowance regime more internationally competitive, lifting the net present value of our plant and machinery allowances from 30th in the OECD to 1st.
• As you can see, this measure is designed to promote productivity enhancing capital investments by companies like yours. It is important businesses understand and take advantage of these generous new reliefs while they are available as they won't last for ever. Therefore...
• Now is the perfect time to invest in new hardware.

The Super Deduction

For two years from 1 April 2021, any investments your business makes in "plant and machinery" will qualify for a 130% capital allowance deduction. HMRC state that Computer Hardware & Servers qualify under this definition and it also covers associated software, therefore we will refer to it as 'IT Infrastructure'.

You can also benefit from a 50% first-year allowance for qualifying special rate (including long life) assets. The Chancellor has called this the SR Allowance.

Both the 130% super-deduction and 50% first-year SR allowance could reduce your corporation tax bills until 2023 because they give qualifying equipment a much higher tax deduction in the tax year of purchase than would otherwise normally occur, i.e. the ‘first year allowance’ (FYA).

The new Capital Allowances offer

As a result of measures announced at this Budget, businesses will now benefit from four significant capital allowance measures:

• The super-deduction - which offers 130% first-year relief on qualifying main rate IT Infrastructure investments until 31 March 2023 for companies.
• The 50% first-year allowance (FYA) for special rate (including long life) assets until 31March 2023 for companies.
• Annual Investment Allowance (AIA) providing 100% relief for IT infrastructure investments up to its highest ever £1 million threshold, until 31 December 2021.
• Within Freeport tax sites, companies can access new Enhanced Capital Allowances (ECA+) and companies, individuals and partnerships can benefit from an increased level of Structures & Buildings Allowance (SBA+) for investments until 30 September 2026
  

So, how does the Super Deduction work?

The new tax relief incentive is being introduced for 2 years for expenditure from 1 April 2021 to 31 March 2023. Now this is a temporary measure so we strongly advise you take advantage of it while it's there. How does it work?

Here’s an example:

Let’s say for example that your business spends £200,000 on IT Infrastructure and thus you’re eligible to claim the super-deduction tax break on this expenditure. When you calculate your taxable profits, your corporate tax deduction will be £260,000 (130% of your investment). Deducting £260,000 from your taxable profits will save your business up to 19% of that and 19% of £260,000 is £49,400. That’s the sort of corporation tax you can save if you qualify for super-deduction.

Bear in mind that this is a 130% deduction for investments that would normally qualify for 18% IT Infrastructure writing down allowances (or capital allowances). And the first-year allowance of 50% on special rate pool expenditure would normally only attract 6% writing down allowances.

OK, so what now?

We strongly suggest you take advantage of this incentive. As discussed, it won't be available beyond March 2023 - so the clock is ticking. By investing in infrastructure that can improve the capability of your organisation, you can save a fortune and steal a march on competition, both foreign and domestic.

If you're not sure of how best to take advantage of this incentive in terms of what IT Infrastructure to acquire, talk to us. If you have any ongoing or upcoming projects that need hardware, or if you're due a refresh in the next few years, talk to us. If you want to discuss finance options or anything related to this incentive, talk to us.

Why wait a few years and pay a fortune more? Now is the time to plan ahead, and you can do that with Simplify IT as your partner. Hardware is already in hot demand with the silicon shortage meaning some electronic equipment is facing delays, with this government incentive too increasing demand, it's no time to play the waiting game.

Give us a call on 0345 1243 441 or fill in the form below and we'll get back to you.

Ready to take advantage? We'd love to hear from you, even if it's just a chat...