Veterinary update: Super deduction – Capital allowances and enhanced tax relief

Published: Wednesday 31 March 2021

As you are probably aware a new ‘super deduction’ was announced at Budget 2021 for companies investing in qualifying expenditure from 1 April 2021 for a two-year period until March 2023.

Please click here for an overview which we included in our recent broadcast email.

The below table includes the types of capital expenditure this might include for a veterinary practice.

As an example, if the veterinary practice (limited company only) purchased a brand new Xray machine for £50,000 the tax deduction would be as follows:

   Pre 31 March 2021   1 April 2021-31 March 2023 
 Cost of Xray 50,000  50,000 
 Increased deduction 15,000 
 Total cost allowable for tax deduction  50,000  65,000 
 Tax deduction @19% 9,500  12,350 

 

The treatment of certain new capital expenditure is set out below:

  1. Fridge for medicines – 130% super deduction
  2. Computer systems – 130% super deduction
  3. Till system - 130% super deduction
  4. Non-moveable cabinets – Normal Annual Investment Allowance* deduction - 100% deduction
  5. Moveable cabinets - 130% super deduction
  6. Fixed shelving – Normal Annual Investment Allowance deduction – 100% deduction
  7. Freestanding shelving (i.e. moveable) - 130% super deduction
  8. Work tops – Normal Annual Investment Allowance deduction – 100% deduction
  9. Signage – 130% super deduction
  10. Office furniture – 130% super deduction
  11. Software – 130% super deduction
  12. Vans – 130% super deduction

If you are considering a capital purchase not on the above list, please do get in touch so we can guide you further.

*As a reminder, the Annual Investment Allowance threshold is as follows:

 to 31 December 2021   From 1 January 2022 
 Annual Investment allowance (AIA)**    100% on first      100% on first
 £1,000,000      £200,000

 

An AIA of £1million applies to investment made up until 31 December 2021. From 1 January 2022 the AIA will reduce to £200,000. For accounting periods which straddle 1 January 2022, transitional arrangements will apply and should be checked as to the maximum amount of AIA that can be claimed.

From 1 April 2021 there is also a 50% First Year Allowance available for Special Rate Pool items (e.g. integral features) which was previously not applicable, meaning more tax relief sooner for certain assets, if not already set against AIA.

Timing

If your year end is 31 March and you delay the expenditure until after  31 March 2021 then although you may get increased deduction of 30%, which for a company would be worth an additional tax deduction in cash terms of £2,850 for each £50k, tax relief would be delayed by a year. For further consideration on timing please click here.

If you have any questions regarding the timing of expenditure and/or whether it will qualify for the super deduction, please do not hesitate to contact one of the team.

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Phil Swan
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Mark Harwood
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Suzanne Headington
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