First revealed in the Spring Budget, the 130% ‘super deduction’ has been introduced to incentivise investment as the UK begins the process of recovering from the economic impacts of the COVID-19 pandemic. The deduction will allow companies to cut their tax bill by almost 25p for every pound invested in new equipment, with only new and unused equipment purchases being eligible for the deduction. Additionally, only contracts entered into after 3rd March 2021 will qualify.
In total, the relief is expected to benefit UK businesses by around £20 billion across the two-year period it will be in effect. The Office for Budget Responsibility have described the relief as moving the UK from 30th in OECD rankings for business investment to 1st. For any business already considering investing in new equipment, including energy solutions, it is not an opportunity to be missed.
With no cap on the relief, businesses that have already explored power resilience solutions or other energy management technologies, or are planning to implement them further along the line, are now strongly incentivised to act promptly. Figures issued by the Treasury demonstrate that for a large project totalling £1 million of qualifying expenditure, the super deduction would allow a deduction of £1.3 million on calculating taxable profits. With corporation tax currently sitting at 19%, the project would net a £247,000 reduction on their tax bill.