Super Tax Deduction replaced with “Full Expensing”

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As of 01 April 2023, the government has announced that Super Tax Deduction will be replaced with Full Expensing. This significant change is expected to have a significant impact on businesses across the UK, and it is essential for business owners to understand how it will affect their bottom line.

What is Super Tax Deduction?

Super Tax Deduction was introduced in the 2021 Budget as an incentive to encourage businesses to invest in new equipment and machinery. Under the scheme, businesses were allowed to deduct 130% of the cost of new qualifying plant and machinery investments from their taxable profits.

What is Full Expensing?

Full Expensing is the new scheme that will replace Super Tax Deduction. Under the new scheme, businesses will be able to fully expense the cost of qualifying plant and machinery investments from their taxable profits. This means that businesses will be able to deduct the full cost of investments from their taxable profits in the year the investment is made.

What are the benefits of Full Expensing?

The benefits of Full Expensing are numerous. Firstly, it will encourage businesses to invest in new equipment and machinery, which will boost productivity and help drive economic growth. Secondly, it will simplify the tax system by removing the need for businesses to calculate and claim Super Tax Deduction.

Finally, Full Expensing will be more generous than Super Tax Deduction. Under Super Tax Deduction, businesses could only deduct 130% of the cost of new qualifying plant and machinery investments from their taxable profits. Under Full Expensing, businesses will be able to deduct 100% of the cost of investments from their taxable profits.

How will Full Expensing affect businesses?

Full Expensing will have a positive impact on businesses that invest in new equipment and machinery. It will help reduce the cost of investment and boost cash flow. However, businesses that do not invest in new equipment and machinery will not benefit from the scheme.

In conclusion, the replacement of Super Tax Deduction with Full Expensing from 01 April 2023 is a positive move for businesses across the UK. It will encourage investment in new equipment and machinery, simplify the tax system, and be more generous than Super Tax Deduction. Business owners are encouraged to consult with their tax advisers to ensure they are prepared for the change and take advantage of the benefits offered by Full Expensing.

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