The impending increase in Corporation Tax to 25% in 2023 was met with obvious dismay from across industry when it was first announced, however, for those companies that want or need to invest in new capital equipment, the rise has a silver lining.
The first-year 130% tax relief provided by the Super Deduction scheme, that was introduced in April 2021, now provides a bigger incentive for businesses to re-invest — it can be applied to any new equipment with unlimited value, whether bought outright or on finance.
Nigel Atherton, XYZ Machine Tools
managing director, said: “When applied to the new Corporation Tax rate customers can make significant savings on new machine tools.”
For example, the purchase of a machine tool valued at £100,000 would generate tax relief of £130,000, at the old rate of Corporation Tax that would save the customer £24,700; with the tax rate at 25% that saving increases to £32,500. If £100,000 of profit is banked it would cost a business £25,000 in tax instead.
Mr Atherton continued: “The manufacturing sector has proved to be extremely resilient throughout the pandemic and post-lockdowns, therefore the announcement of increases Corporation Tax and National Insurance did come as a blow. However, we have to look for the positives and, if a company is in a position to re-invest profits back into the business, the added incentive of the Super Deduction Scheme provides that silver lining.”
Leading from the front, XYZ Machine Tools has continued to invest in its own business in order to maintain its levels of service to customers, whether through increasing the number of employees in customer facing roles or, continuing to provide its extensive range of machines, the vast majority of which are available ex-stock from its Devon headquarters in Burlescombe.