How Super Deduction can get you equipment and save you tax pounds up to 130%

(Super Deduction Tax for the paint shop - will it help me? ) - Author - Andy Potts December 13th 2021 (reading time 2 mins)

inflation and rising prices

Does Super Deduction Tax Help Me or the Government?

Quite often when you see the word 'TAX' in a sentence you'd be forgiven for thinking it does anything but reduce your bank balance by a sizeable chunk! In this case there is a genuine beneficial aid to paint shop owners and paint sprayers out there (and other people of course). The scheme setup by the government is called SUPER DEDUCTION, originally designed to aid recovery, coming out of the end of the initial Covid lockdown. It provides anyone with a company the ability to purchase plant and equipment as normal but receive a super tax susidiary to reduce your tax bill and is more attractive than any scheme since war times.

What Does the Super Deduction Tax Scheme Mean?

It's a super tax reduction of 130% of your initial purchase a 50% first year allowance for qualifying special rate assets. So.... what does this mean for my paint shop then in normal terms? Well lets look at a couple of examples to simplify how it works.

EXAMPLE 1 - Excellent Joinery Company Ltd Wants to Buy a Spray Booth

The super deduction only applies to capital purchases of plant , machinery and equipment so for example buying a new car wouldn't count unless it's a tractor! But items like spray booths, spray pumps, compressors and large machinery like solvent recyclers all count.

Lets say you buy a top of the line Bench Spray Booth with all of the bells and whistles for £14,000 GBP

Initial Outlay

So the initial purchase outlay or asset outlay is £14000.

Tax Relief Claimed

Relief claimed is £14,000 x 130% = £18200

Tax Saving Calculation

Corporation tax for a company is set at 19% currently, meaning you would then calculate the full tax saving as follows.

£18,200 (Super deduction claim) x 19% Corporation tax = £3458.00 tax saving against your accounts.

How This Would Look In A Normal Year

If you made this same purchase during a normal non super deduction tax year, your tax saving would work out as follows.

Asset price £14,000 x 19% Corporation tax = £2660 that's £798 less against your tax bill.

EXAMPLE 2 - Super Steel Sprayers Need a new Unic Solvent Recycler

Lets say Super Steel Sprayers need a new UNIC Solvent Recycler (Ideal if you spray a lot and need to reduce VOC emissions to meet your local council target) for £6823.20 GBP.

Initial Outlay

So the initial purchase outlay or asset outlay is £6823.20.

Tax Relief Claimed

Relief claimed is £6823.20 x 130% = £8870.16

Tax Saving Calculation

Corporation tax for a company is set at 19% currently, meaning you would then calculate the full tax saving as follows.

£8870.16 (Super deduction claim) x 19% Corporation tax = £1685.33 tax saving against your accounts.

How This Would Look In A Standard Year

If you made this same purchase during a normal non super deduction tax year, your tax saving would work out as follows.

Asset price £6823.20 x 19% Corporation tax = £1296.40 that's £388.93 less against your tax bill than with Super Deduction.

Big Savings But What Are The Criteria

There really is a unique opportunity to make some huge savings on your tax bill if you can shoehorn in some capital expenditure and the rules are fairly simple.

Time Constraints?

The Super Tax Deduction rates run out March 2022 tax year so ensure you've made any capital purchases before then.

What Can I Buy?

Plant, Machinery and equipment are sure fire ways to get in on reductions. Items in paint shops such as UNIC solvent recyclers, Wagner spray pumps or even a new Spray Booth will all easily qualify for super deduction. Some vehicles also qualify like tractors and main pool HGV vehicles, but sadly that new Porsche sportscar...won't!

Who Is Eligible?

Sorry sole traders, LLP's and Partnerships but this is a strictly Limited Company (Ltd) deal only, as it's a Corporation allowance. Sole traders and the other class types still have the Annual Investment Allowance but this is unchanged and doesn't provide further savings.

Still Confused About Super Deduction Tax?

No problem we have the official .Gov document here explaining the full rules and procedures in detail but we are also happy to help you wiht a bespoke advice session just use the contact details below for help. We can also help you stretch out your remaining finance but take advantage of Super Deduction Tax using leasing options. Our full leasing support from well regarded Credit Broker Kennett Leasing will allow you to spread payments across a number of months while still applying for 130% super tax deduction rates on your equipment.