The new super-deduction capital allowance promises huge tax savings for businesses with cash to spend on new assets, but how does it affect the construction industry and what are the key points companies need to know to take full advantage of the benefits?
In this article we investigate super-deduction, who it benefits and what it means for our customers.
What is Super-deduction?
The super-deduction capital allowance tax break was introduced in April 2021. It’s a government incentive aimed at helping businesses recover from the impact of COVID-19 by encouraging investment in new assets, such as, plant and machinery.
Between 1st April 2021 and 31st March 2023, companies that invest in qualifying new plant and machinery will be eligible to claim:
- A 130% first-year relief on investments in qualifying main rate plant and machinery.
- A 50% first-year allowance (FYA) for qualifying special rate assets, including long life.
Why has it been introduced?
In the past the Government has used various types of capital allowance to raise levels of business investment, such as the Annual Investment Allowance (AIA) introduced in 2008 in response to the recession.
The super-deduction aims to aid the recovery of the economy following the impact of the COVID-19 pandemic. Between Q3 of 2019 and Q3 of 2020, the level of investment in business saw a reduction of 11.6%. This lack of business investment has significantly reduced productivity growth since 2008.
So, by changing capital allowances to make them more generous, it encourages businesses to make additional purchases and bring future investments forward.
Who does it benefit?
Let’s be frank, on the face of it, the super-deduction appears to only benefit companies who have a cash pot available and those who are willing to ‘spend to save’. This could easily be viewed as an advantage for only the ‘money-rich’ players.
However, the demand for plant and machinery should also benefit the supply chain of these companies. Driving investment into these supply chains will support thousands of SMEs across the country which make them up.
Unfortunately, there are some who cannot benefit from the scheme. Sole-traders and partnerships do not qualify and companies who sell the assets will see the proceeds of the sale inflated by 130%.
IMPACT ON THE
CONSTRUCTION INDUSTRY
The announcement from the Chancellor of the Exchequer in early March was welcomed by many in the industry as it aims to boost the construction plant and equipment supply chain and improve the productivity and competitiveness of UK businesses. Following Brexit and a greater emphasis on UK manufacture, this tax relief could be the driving force behind encouraging large construction companies to work with UK-based manufacturing and distribution companies.
Rishi Sunak
Chancellor of the Exchequer
“Under the existing rules, a construction firm buying £10 million of new equipment could reduce their taxable income in the year they invest by £2.6 million. With the super deduction they can now reduce it by £13 million. We’ve never tried this before in our country.”
Rob Oliver
CEO of the Construction Equipment Association
“…we shouldn’t forget that there is a solid, creative and innovative construction equipment “sub-culture”. These are the companies that supply the excavator buckets, the plant-hire management software, telematics and the new ways of making our construction sites safe and secure."
What does this mean for our customers?
Our product range is designed around improving site safety and providing innovative solutions that improve on-site processes. This means many of our products qualify for the super-deduction tax relief, so contractors who are beginning to plan, or who are already working on large-scale infrastructure projects, such as HS2, could make huge tax savings from investing in new, high-quality equipment.
Crane Forks Cage
If you are looking to improve on-site safety, the Crane Forks Cage was designed as a fail-safe method for lifting palletised material due to the failings of traditional methods, such as, Safety Restraint Nets. First trialled on the Northern Line Extension project, it received rave reviews from FLO (Ferrovial Agroman Laing O’Rourke JV) and Select Plant Hire. The Crane Forks Cage is now viewed as the industry’s best-practice solution.
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Concrete Washout System
Reduce the environmental impact of construction sites with our Concrete Washout System, a unique, compact, one-stop solution for on-site concrete water management. It can be used on a variety of applications including concrete skips, pumps and trucks and reuses 100% of concrete wastewater, hugely improving the environmental footprint.
Check out our other concrete washout products:
VIEW RANGE
BulkX
Searching for ways to improve the efficiency and safety of bulk excavation? BulkX allows contractors to transfer excavated waste directly into waste management vehicles or designated muck bays. Standard range options cover most site requirements but our design and manufacturing capabilities allow us to offer bespoke solutions to suit any application.
BulkX has been a huge asset on major infrastructure projects in the UK and abroad, such as:
Our product range is designed around improving site safety and providing innovative solutions that improve on-site processes. This means many of our products qualify for the super-deduction tax relief, so contractors who are beginning to plan, or who are already working on large-scale infrastructure projects, such as HS2, could make huge tax savings from investing in new, high-quality equipment.
References:
https://www.gov.uk/guidance/super-deduction
https://www.bdo.co.uk/en-gb/insights/tax/capital-allowances/capital-allowances-super-deduction-how-it-works
https://cpnonline.co.uk/features/what-the-super-deduction-means-for-you/
https://mooreks.co.uk/insights/construction-sector-to-cash-in-on-super-deduction-while-it-lasts/
https://www.eqaccountants.co.uk/super-deduction-to-encourage-investment-in-the-construction-sector/
