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Super-deduction explained for compressors and refrigeration units

From the 1st April 2021, a new super-deduction capital allowance is being launched in the UK to help firms invest in productivity-enhancing equipment.

What exactly is it?

Super-deduction means businesses can claim 130% first-year relief on main rate plant equipment investments between 1st April 2021 and 31st March 2023.

The main rate assets must be bought new during the time period. It is not something you lease or buy second hand.

Super-deduction qualifying assets

The focus is on plant and machinery investments that bridge the productivity gap between the UK and its competitors.

Qualifying equipment from our range of productivity enhancing products include:

  • Air compressors
  • Refrigeration units
  • Dryers
  • Nitrogen generators
  • Vacuum pumps

It can’t be something that a landlord has installed, it is an investment by the company.

Equipment that is already on order before 1st April 2021 does not qualify.

Are you eligible?

If your company is within the charge of Corporation Tax on or after 1st April 2021 then you are eligible.

Super-deduction example for compressors

You invest in a new compressed air system that will improve your energy efficiency, meet your current air demand but with added capacity to support an additional production line in 6 months time.

You spend £100K on qualifying assets.

This means you can deduct £130K from taxable profits. (£100K x 130%)

You receive a tax saving of £24,700 (£130K x 19%)

Super deduction example for refrigeration units

To meet increased demand, you invest in a new efficient point of use chiller for your production line. This reliable addition boosts your productivity and reduces the risk of downtime.

You spend £25K on qualifying assets.

This means you can deduct £32.5K from taxable profits. (£25K x 130%)

You receive a tax saving of £6,175 (£32.5K x 19%)

Know your options

The super-deduction capital allowance means it is a great time to invest in your company.

At PPS we can work with you on these projects to ensure you can access this allowance, but also to make sure the equipment you install is the most cost effective over the lifetime of the machinery.

We aim to unleash your productivity by looking at full system solutions.

Give us a call on 01422 321 772 to discuss your options or send us an email on sales@pps.co.com to start the ball rolling.

Find out more about super-deduction

You can find the government guidance on super-deduction here: https://www.gov.uk/guidance/super-deduction

Additional information from the British Compressed Air Society can be found here:
https://www.bcas.org.uk/time-to-invest-in-captial-equipment-super-deduction-tax-break.aspx

Please note: this article does provide investment, financial or tax advice. It is an illustrative example. Please speak to your own company tax advisor.