UK Government’s Super-Deduction Scheme

Introducing the UK government super-deduction scheme 

On Wednesday 3rd March 2021 the UK government confirmed that from 1st April 2021 a new initiative called the super-deduction would be introduced. The scheme is scheduled to last until 31st March 2023.

The aim of the scheme is to promote an investment-led recovery as the UK emerges from lockdown, this has a huge impact on UK construction companies who are looking to make significant investments into new plant and machinery. This article will help construction entrepreneurs understand the basics of the super-deduction scheme and what it means for those thinking of investing in a Fibo Collect plant. All this in less time than it takes to drink a cup of coffee. 

What is the UK governments super-deduction 

Under the old rules, a company investing into plant and machinery would be able to claim back ‘’capital allowances’’ against 100% of the cost of a new machine & up to a maximum annual investment allowance of £1million. In addition, that same company could claim a ‘’writing down allowance’’ of 18% of the cost of the equipment which can be used to offset corporation tax, for anything over £1million.

Under the new rules from 1st April 2021 until 31st March 2023 a company can claim a full 130% of the cost as a first-year relief.

Practical examples of the super-deduction in action

Example 1 : 

Builders ‘R’ Us UK Ltd is a local builders merchant, they choose to invest £210,000 into purchasing a new Fibo Collect fully automated, self-service batching plant so they can sell collectable concrete, mortar and screed to their existing customers.

Example 2 : 

Builders ‘R’ Us UK Ltd invests £1.2million into purchasing six Fibo Collect fully automated, self-service batching plant so they can expand the concept across all their sites in the UK.

Do Fibo concrete batching plants qualify for the super-deduction?

In short, the answer is Yes. Assets that qualify are defined as plant and machinery that would have normally qualified in the main pool such as plant, machinery, tooling equipment, tractors and so on. However we would always encourage clients to seek independent advice from a UK based financial planner or accountancy firm.

• To learn more about the technicalities related to Capital Allowances see see this Gov Article
• To download the governments fact sheet on the super-deduction scheme click here 

Importantly, the deduction will only apply to new and unused plant. All Fibo Batching plants are manufactured and shipped from the factory in Denmark. Fibo is renowned for its ability to create plants with real staying power and low maintenance costs over a lifespan – just a reflection of good Danish quality.

In most cases the total savings made on the scheme can cover the entire cost of loan interest with cash left in the bank to go towards future maintenance costs and software upgrades.

What does this mean for companies who invest in a Fibo Collect self-service batching plant?

Cash flow is more critical today with the new challenges we have in growing construction businesses. Qualifying UK companies can use the new super-deduction along with a secure business finance loan to create a profitable business case that generates a faster return on investment.

Companies who qualify for finance generally opt for a 5-year repayment plan : An initial 20% down payment is made then the rest of the payments are broken down over a 5-year period with a single payment being made each month. This provides a great opportunity for companies making larger investments to spread the costs whilst generating year-on-year profit.

Now let’s consider how this would be for a Fibo collect customer who combines the government’s super-deduction savings with a secure business loan in order to acquire the asset. Companies who do this will ultimately use the total savings made on the scheme to cover the entire cost of interest with cash left in the bank to cover all future maintenance costs and software upgrades.

Fibo Collect business case 

The best way to understand the new UK Government Super Tax Deduction scheme is by looking at a Fibo Collect business case example.

Builders ‘R’ Us UK Ltd invest £220,000 into a Fibo Collect: a fully automated, self-service batching plant. The company takes out a secure business loan over a 5-year repayment period. 

Business case example: Key trading numbers from year 1

Business case example: Cost of finance and total tax saving in year 1

Business case example: Year 1 summary

In the example provided above the company are able to achieve the following in year 1 from a single Fibo Collect machine :

• Total revenue generation of £374,000
• Total margin of £152,946
• Total net profit of £122,266 
• Estimated pay back period of 1.6 years

Disclaimer

• Calculations have not been verified by a third party and are for illustrative purposes only.
• Calculations are carried out by Fibo Intercon A/S based on open data sources.
• All data is confidential and provided without any responsibility or liability.
• The calculations are based on initial figures provided by a local UK-based client in relation to price and production.