How Temporary Tax Relief on Capital Asset Investments Could Benefit Your Business

The roadmap out of lockdown is well underway, and as we enter stage two, more businesses will be opening their doors in a bid to rebuild from the events of the past year. While the pandemic has presented many challenges, the government has recently announced temporary tax relief on qualifying capital asset investments from 1st April.

man in plantExpenditure on machinery and equipment is a significant cost for most organisations, so this news comes as an opportunity to stimulate business investment to push growth as we move forward from the pandemic.


What does the temporary tax relief measure provide?

The government’s temporary tax relief on capital asset investments provides additional allowances for qualifying expenditure from 1st April 2021 to 31st March 2023.

The allowances will give a super deduction of 130% on qualifying plant and machinery investments, which would normally qualify for an 18% writing down allowance. In addition, there is a first-year allowance of 50% on capital expenditure, which would normally be eligible for a 6% writing down allowance.

The relief is only available to incorporated companies, and it is only for new assets.

It is hoped this measure will positively impact the economy and give organisations the confidence to invest in new assets to improve and grow.

So, why is the temporary tax relief on capital asset investment a great opportunity for businesses?


Growth is needed

This initiative is providing a much-needed boost for business growth after a turbulent year. Companies have the opportunity to benefit from significant tax cuts on capital equipment. Plus, there is an added bonus of getting the latest machinery and technology to take your business operations to the next level.

Many industries will also benefit from this tax relief, including the manufacturing sector. With the next few years still uncertain and current exchange rates favourable, all types of UK manufacturing could see a boost in demand with this tax relief initiative.


How your company can utilise this temporary tax relief scheme

Any capital investment is a significant cost for businesses, especially post-pandemic. However, if your organisation is looking to move forward, considering asset-based lending is a viable option.


Asset-Based Lending  

Traditional lenders have a narrow position on finance due to the pandemic, so this avenue is not currently available to everyone. However, that doesn’t mean your business should suffer any further in the current climate.

As we’ve all seen, change happens quickly, and asset finance can be an excellent solution for companies looking to fund growth and even drive change. Asset finance allows you to take action quickly and reduces risk when taking on a new venture.

There are a variety of finance options that enable your business to purchase qualifying capital assets, including machinery, computer systems, and software. The common types of asset finance include:


  • Hire purchase
  • Hire purchase with VAT deferral
  • Leasing


Each lending solution has varying criteria and terms, but these options provide a valuable way to grow your business and increase your revenue.

If you are considering using the temporary tax relief on capital asset investments financed by Hire Purchase or similar contract finance solutions, there are additional conditions to meet in order to qualify for the relief. At present, these are still being drawn up. A financial broker can help you understand the criteria and restrictions of this tax relief in more detail.

In all, temporary tax relief is great news for limited companies considering asset investment that falls within the criteria. For more advice and information on the government announcement and asset lending solutions, TSF Finance is available to answer any questions.

Book a meeting with one of our team to discuss the next steps for your business and how to move forward.

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