In addition to the £1 million Annual Investment Allowance (AIA) for investments into plant and machinery, at Budget 2021 the Government announced a new super-deduction.
For two years from 1 April 2021, businesses investing in new plant and machinery will be able to claim:
- a 130% super-deduction capital allowance on qualifying plant and machinery investments
- a 50% first-year allowance for qualifying special rate assets
The super-deduction, or new 50% first-year allowance, allows businesses to cut their tax bill, making it less expensive to invest in new plant and machinery. For qualifying equipment, a business could benefit from a super-deduction of 130% of the investment incurred. For example, on spending of £100,000 a business could deduct £130,000 from its taxable profits, which would represent a reduction of up to £24,700 on its corporation tax bill for that tax period.
One way to increase the financial return of investing in new equipment would be to select the equipment from the Government’s world-leading Energy Technology List (ETL). This list features 14,000 high performing energy efficient products that save energy and money through their use.
All products listed on the ETL are verified as meeting higher energy efficient performance standards, typically in the top 25% of products available in the market. By investing in ETL listed energy saving equipment, businesses can lower energy bills, reduce greenhouse gas emissions and shorten investment payback periods.
The ETL showcases 56 higher efficiency technologies including boilers, chillers, lights, heat pumps, and electric motors. 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.
Businesses are increasingly feeling the pressure to hit carbon reduction targets aligned with the worldwide need to achieve net zero emissions by 2050. Many businesses have already committed to achieve net zero as part of the BEIS COP26 Race To Zero campaign, and the ETL can be a vital tool in supporting their efforts.
Using tax incentives such as the super-deduction can help businesses create valuable financial savings while also driving the necessary changes to reduce emissions.
For more information see the HM Treasury announcement here.
Search the Energy Technology List here to find top-performing products in 56 different technology categories.