Take advantage of tax super-deduction to green your business and save

Now is a great time to invest in plant and machinery that deliver savings and CO2 reductions, with the super-deduction tax breaks.

Until 1 April 2023, you can claim a 130% super-deduction capital allowance on qualifying plant and machinery investments.

Among the qualifying items are:

• Solar panels
• EV charge points
• Heat pumps
• Variable speed drives

How does the super-deduction work?

The super-deduction allows you to cut your business tax bill, making it less expensive to invest in new plant and machinery.

If you spend, for example,  £100,000 on new plant or machinery, you would be allowed to deduct £130,000 from your taxable profits, which would represent a reduction of up to £24,700 on its corporation tax bill for that tax period. Deducting £130,000 from your taxable profits will save your business up to 19%.

It’s wise to select equipment from the Government’s Energy Technology List (ETL), which features 14,000 energy efficient products that save energy and money.

Products listed on the ETL meet higher energy efficient performance standards, typically in the top 25% of products available. The government is keen to encourage all businesses to invest in ETL listed energy saving equipment as part of its mission to achieve net zero carbon emissions targets by 2050.

It believes that by buying products on the ETL, businesses will reduce energy bills and greenhouse gas emissions while shortening investment payback periods. A wide range of UK sectors, such as manufacturing, retail and hospitality already benefit from the energy and cost savings achieved by purchasing ETL listed equipment.

Carbon emission reductions

There will be increasing focus on big reductions in CO2 emissions and all businesses will be prompted to hit carbon reduction targets as part of a global drive to achieve net zero emissions by 2050. Many businesses are committed to achieve net zero through the COP26 Race To Zero campaign.

The Chancellor also set a 50% first-year allowance for qualifying special rate assets that applies until March 2023. and other businesses can still take advantage of the Annual Investment Allowance (AIA) which is currently set at £1 million and is in place until 31st December 2023.

Also, 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 30th September 2026.

The moves by Chancellor Rishi Sunak makes the UK’s capital allowance system more internationally competitive, lifting the net present value of UK plant and machinery allowances from 30th in the OECD to number 1. The Government is hoping that the super-deduction will give companies a strong incentive to make additional investments, and to bring planned investments forward.

Limited time for tax breaks

It’s unlikely that the super-deduction will be extended beyond next March so now really is the best time financially to make the investments in energy-saving and carbon-cutting equipment. The government is pushing hard to transform transport and heating sectors, among other targets, with solid business cases to adopt heat pump technology for business heating and hot water, as well as electric vehicles.

As part of the move to low carbon transport and heating, solar will play a significant role, helping to reduce energy costs and CO2 emissions. The highly efficient variable speed drives (VSDs) are designed to reduce the levels of “wasted” energy that over-specified electric motors consume. They are the smart, cost-effective way to make significant savings on energy costs while reducing carbon emissions.

Need help in taking first steps on the low-carbon, energy reduction road? Talk to our expert team about heat pumps for business, solar panel installation, EV charging and VSDs. Call 0333 123 5464.