Super-deduction tax break: A helping hand for your laboratory investments

With the announcement of a £25 billion super-deduction tax break in the last budget, organisations will be able to claim 130% tax relief on spending against capital equipment.  Designed to fuel business growth, we look at how the savings are applied and how they can provide welcome financial support for your laboratory investments.

Why has the Government introduced the super-deduction tax break?

During the Pandemic, levels of investment have fallen, with a reduction of 11.6% between 2019 and 20202. Understandably, the economic shock and uncertainty have resulted in a reluctance to invest.  In direct response, tax reliefs have been introduced to give organisations a helping hand to grow by incentivising investment in productivity-enhancing machinery3.

How does the super-deduction tax break work?

Running from April 2021, the super-deduction tax break provides the opportunity to access a further 30% in tax relief against capital investments.  For organisations that pay Corporation Tax, this could equate to a total of 130% tax relief against machinery.  In practical terms, if your organisation is subject to the 19% standard tax rate, savings could work as follows:

£10k investment:

  • Your company spends £10k on new laboratory and testing equipment
  • You now get an allowable capital investment deduction of £13k
  • Your corporation tax relief is now 19% on £13K
  • That equates to £2,470 of tax savings versus £1,900 prior to April 2021

£1m investment:

  • Your company spends £1m on new equipment
  • You now get an allowable capital investment deduction of £1.3m
  • Your corporation tax relief is now 19% on £1.3m
  • That equates to £247,000 of tax savings versus £190,000 prior to April 2021. An additional tax saving of up to £57K
Figure 1. example of super-deduction savings

Qualifying laboratory instruments and equipment can include (but are not limited to) new autoclaves, incubators, ultra-low temperature freezers, spectrophotometers, titrators, analytical balances, and inspection equipment.  Unfortunately, second-hand, or refurbished equipment are exempt from tax relief. All new assets must be in use within the financial year that you are claiming the super-deduction tax break for your equipment to qualify6.

Making the right investments

The super-deduction tax relief offers a prime opportunity to replace, upgrade or add to your existing laboratory equipment. However, it can be an arduous process to identify the right equipment for your needs while satisfying internal and external compliance regulations.

At Gem Scientific, our technical team will provide you a comprehensive no obligation assessment of the condition and suitability of your equipment against your current laboratory objectives.

Weighing up your equipment investment options should not be taxing.  Conducted by a skilled technical manager, the assessment will enable you to make informed decisions about where to invest, any additional support that will help to enhance your processes as well as available finance options that will support your needs.  Make the most of the super-deduction tax break by contacting us to arrange your free consultation today.

Sources

1 and 2 Swoop (2021) ‘The super-deduction allowance’ [Online] Available at https://swoopfunding.com/uk/covid-19/super-deduction/ (Accessed 14th April 2021) Paragraphs 1 and 2.

3 GOV.UK (2021) ‘Super-deduction’ [Online] Available at https://www.gov.uk/guidance/super-deduction (Accessed 14th April 2021)

4 Office for Budget Responsibility (2021) ‘Economic and fiscal outlook – March 2021’ [Online] Available at https://obr.uk/efo/economic-and-fiscal-outlook-march-2021/ (Accessed 19th April 2021) March 2021 Economic and fiscal outlook – Executive summary PDF Section 1.34

5 HM Treasury (2021) ‘Budget 2021 – Super-deduction’ [Online] Available at

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/967202/Super_deduction_factsheet.pdf (Accessed 14th April 2021)

6 Batham-Tomkins, K (2021) ‘Super Deduction’ [Online] Available at https://bhp.co.uk/news-events/blog/super-deduction/ (Accessed 14th April 2021)


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