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Super Deduction Could Save You Money on Dental Equipment

Super Deduction Tax Header
Looking to invest in new dental equipment? The government’s super deduction incentive could save you 130 per cent on fresh purchases for your practice.

What is the Super Deduction Incentive?

Introduced as part of the 2021 Budget, the super deduction incentive allows companies looking to invest in new equipment the opportunity to benefit from tax relief.

Valid from 1 April 2021 until the end of March 2023, companies can claim 130 per cent capital allowances on qualifying purchases on plant and machinery investments. This means, that for every pound a business invests, taxes are cut by up to 25p.

You can also benefit from a 50 per cent first-year allowance for qualifying special rate assets; this is referred to as an ‘SR allowance’.

Why Has the Super Deduction Incentive Been Introduced?

Described by Chancellor Rishi Sunak as a “direct way to help businesses invest” and “drive growth in the economy”, the super deduction incentive is by far the most attractive method of tax relief for businesses ever offered by a UK government.

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The scheme is intended to significantly boost the UK’s economic recovery following the COVID-19 pandemic. It is also hoped that such a generous enticement will help to kickstart the country’s historically low levels of productivity.

The super deduction will increase the likelihood of companies making additional, much larger, investments now rather than gradually in the future.

How Does the Super Deduction Incentive Work?

Significant purchases made to improve your business between 1 April 2021 and 31 March 2023 may be eligible for tax relief.

For example:

  • Your business spends £10,000 on equipment and is eligible to claim the super deduction on this expenditure
  • When your taxable profits are calculated, your corporate tax deduction will be £13,000 (130 per cent of your initial investment)
  • By deducting £13,000 from your taxable profits, your business will save up to 19 per cent – in this instance, a sum of £2,470

    • Only registered private or public companies can take advantage of the super deduction incentive.

    What Purchases Qualify for the Super Deduction Incentive?

    In general, most capital investment made in main pool expenditure assets will qualify under the scheme. There are some exceptions, however, the range of qualifying groups is quite broad.

    Dentist's Chair

    The 130% super deduction covers purchases of new plant and machinery that would ordinarily qualify for the 18% main pool rate of capital allowances.

    Meanwhile, the ‘SR allowance’ can be used to buy new plant and machinery that qualify for the 6% special rate pool, including integral features in a building and ‘long life’ assets (items with a lifespan of over 25 years).

    While this might not sound like it refers to dental equipment, practices can be assured that most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances.

    It is worth noting that the UK government has not provided an exhaustive list of plant and machinery assets.

    Likewise, it is only brand-new assets that will be covered by the initiative. Expenditure on second-hand items will not be taken into account.

    Need More Information?

    For more information on the super deduction incentive, consult the government-approved links below:

    Check if you can claim super-deduction or special rate first year allowances - GOV.UK (www.gov.uk)

    Claim capital allowances: What you can claim on - GOV.UK (www.gov.uk)

    We recommend you seek proper tax advice if you have any specific queries regarding this relief.

    Please note, this relief is only available for companies, not sole traders and partnerships.