Get 130% capital allowance on your TMS projects
June 14, 2021
In the UK, a range of generous tax incentives have been introduced in the 2021 Spring Budget to help drive innovation and stimulate investment. One of the key measures announced was the introduction of the ‘super-deduction’ for capital expenditure which will be available through the capital allowances regime. For treasurers considering technology projects, this represents a tempting opportunity. These are the key points to consider.
Further details can be found in the attached flyer.
So what is the super-deduction?
The super-deduction will allow businesses to benefit from a 130% first year allowance for investment incurred on certain plant and machinery (which would have normally attracted tax relief at 18%) which is new and unused. We understand this could include finance and treasury systems and associated interfaces.
Our calculations indicate that this could provide a cash tax benefit (for a tax paying business) of 25% of the cost of the qualifying expenditure based on a number of assumptions:
- The measures are temporary and will apply to new expenditure incurred from 1 April 2021 to 31 March 2023.
- It is only available to companies within the charge to corporation tax - not available to sole traders or partnerships.
- It will only be available for contracts entered into on or after 3 March 2021.
What treasury related expenditure will qualify?
- Capital expenditure on software purchased from a third party software vendor (e.g. software licenses) or developed internally.
- Capitalised staff costs relating to projects which are capital for tax purposes.
- Third party systems integration or implementation professional fees.
If you are considering a treasury technology project and kicking this off in the near future this could allow you to recoup part of the costs through your tax bill. It can also help you produce a better technology business case if you factor in the tax savings.
Please get in touch if you want to discuss how this could benefit you.