Reaction from Wednesday’s budget - Chris Mangle, Executive Director
05 Mar 2021
There were two significant budget announcements designed to support this statement; Super Deductions and Recovery Loan Scheme.
We have put together our thoughts on these two announcements to explain what they might mean for you and your business.
Super deductions rip up the rule book and it’s something that we’ve never tried before in our country. Designed to make investment a greater incentive and accelerate investment plans, for the next 2 years businesses will be able to invest in business assets and receive 130% tax relief. Another way of looking at that is £1.30 of tax relief on taxable income against every £1 of asset investment.
In simple terms, if a company has £130,000 taxable income in the year and they invest £100,000 in assets, there is £0 corporation tax due on the £130,000 taxable income in the period. In the example provided by Rishi Sunak: “If a construction firm was to buy £10 million of new equipment, they could currently reduce their taxable income in the year they invest by just £2.6 million. With the Super Deduction they can now reduce it by £13 million.”
The benefit for businesses of all sizes are palpable.
How can I purchase the assets, cash or finance?
Business investment and the super deduction tax savings can be funded in a number of ways. Use of company cash resources is an option, however finance and asset finance, such as Hire and Lease Purchase, can also be used for investment and also qualifies to obtain 130% tax relief.
Recovery Loan Scheme
With CBILS and Bounce Back Loans schemes coming to an end on 31st March 2021, the Government have introduced the Recovery Loan Scheme (RLS) which will be available to support, where appropriate, investment in assets which qualify for Super Deductions Tax Relief.
Full details can be found here, and the highlights and key points to note are as follows:
You will be able to apply for a loan if your business:
- is trading in the UK
You will need to show that your business:
- is viable or would be viable were it not for the pandemic
- has been impacted by the coronavirus pandemic
- is not in collective insolvency proceedings - further details will be provided in due course
Businesses that have received support under the existing COVID-19 guaranteed loan schemes will still be eligible to access finance under this scheme, if they meet all other eligibility criteria.
If you fit the qualifying criteria, all businesses (except those on the none-eligible list detailed) irrespective of size will be able to access the scheme.
What type of finance is available?
- Finance terms are up to six years for term loans and asset finance facilities.
- Term loans and overdrafts will be available between £25,001 and £10 million per business.
- Invoice finance and asset finance will be available between £1,000 and £10 million per business.
- For overdrafts and invoice finance facilities, terms will be up to three years.
- No personal guarantees will be taken on facilities up to £250,000, and a borrower’s principal private residence cannot be taken as security.
Who cannot apply?
Businesses from any sector will be eligible to apply, except:
- banks, building societies, insurers and reinsurers (but not insurance brokers)
- public-sector bodies
- state-funded primary and secondary schools
The scheme goes live 6th April 2021 and full details are to follow. Any future changes to the scheme will be reflected in HM Government RSL link provided.
If you want further guidance or support on any of the above, we’d be delighted to hear from you.
0114 442 8008