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TWP calls on businesses to make use of big tax savings while they still have time

With businesses across the UK struggling to invest, Surrey-based accountants TWP is concerned that many may be unaware of an important tax saving.

The firm, which has offices in Weybridge and Cranleigh, is calling on companies to use the generous Capital Allowances scheme before they change next year.

Businesses now have less than 12 months remaining to make full use of the current super-deduction before this temporary Corporation Tax relief ends on 31 March 2023.

Under the super-deduction, companies are able to claim allowances of 130 per cent on most new plant and machinery investments, which they can use to reduce their Corporation Tax liabilities.

According to HM Revenue & Customs (HMRC), this allows companies to cut their tax bill by up to 25p for every £1 they invest.

At the same time, most incorporated businesses can also claim a first-year allowance of 50 per cent on special rate assets that do not qualify for the super-deduction.

Stephen Nicholls, Business and Corporate Tax Manager at TWP, said: “The current super-deduction is a great way to reduce the amount of tax a company pays while helping it to fund investment in innovations that can help their business to grow.

“While many businesses are already benefiting from this temporary relief there are likely to be many more businesses out there who could miss this opportunity to reduce their Corporation Tax bill unless they act quickly.”

Stephen explained that the rate of the super-deduction will require apportioning if an accounting period straddles 1 April 2023, which could reduce the benefits on offer to companies.

For this reason, businesses might benefit from bringing forward planned expenditures to take advantage of these schemes in the current tax year.

“Unfortunately, the super-deduction is only available to incorporated companies, but unincorporated businesses, such as partnerships and sole traders, can continue to benefit from the Annual Investment Allowance,” Stephen added.

“This permits a deduction of 100 per cent for qualifying plant or machinery expenditure up to the threshold of £1 million. However, this significant allowance also shrinks to just £200,000 from April next year.”

Given the short time left to claim these beneficial allowances, TWPs is encouraging businesses to seek advice to see whether they could reduce their tax bill this year.

To find out more about TWP’s tax advisory services, please contact us.