Chris Downing, Director of Inspire, the business and tax advisers, answers your questions.

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Q: Is the Chancellor’s ‘super-deduction’ really worthy of its name?

The Chancellor’s much talked-about ‘super-deduction’ was introduced from 1 April 2021. Although far from being an April Fool, the all-new tax saving for companies purchasing new equipment and machinery isn’t necessarily everything it seems at a first glance. That said, if you are purchasing new equipment and machinery, then there may be additional tax benefits.

• There are rules already in place offering 100% deduction on the first £1m of expenditure on some equipment and machinery items, so this is an extra 30% of deduction.
• In a nutshell, for every £1 spent (using the super-deduction), the company’s tax bill will be reduced by 25p, rather than 19p currently.
• The tax relief only applies to new and unused assets, such as;
  • Computer equipment and servers.
  • Office chairs and desks.
  • Tractors, lorries and vans.
  • Solar panels.
  • ‘Long-life’ assets (those expected to last at least 25 years) are excluded.
  • The Treasury has produced further guidance on what is eligible under the scheme.
• The deduction is only available until 31 March 2023, if you dispose of the asset you purchased before that date, there may well be tax clawbacks.

My colleague, Helen Fraser, has produced a helpful guide if you’d like to know more about the super-deduction, you can read her blog here.

Q: What do I need to know from the government’s latest announcement on changes to taxes?

23 March had been billed as ‘Tax Day’, when the government would outline its future tax strategy and we’d see an indication of what changes were to come in the short to medium term.

What was actually announced by the Treasury on the day was far from comprehensive and   revealed very little.  However, there were a few useful points for business owners to be aware of:

• Tax administration
  •  Specific measures will be targeted at making reporting more real time reporting. This could involve individuals and companies paying tax more often as the year progresses.
  • There will also be lower administration burdens on people recording Inheritance Tax details, where no tax is due.
• Tackling non-compliance
  • There will be an increased focus on tax avoidance.
  •  Details of a review of how changes to how people who provide their services via Personal Service Companies would be taxed. This is already in place for public sector organisations and as of 6 April has started for larger companies. However, it seems only a matter of time until this filters down to small companies.
  • As preparation for this, businesses should be looking at who they engage on this business and how they would be affected.
• The overall concept of business rates will be reviewed – this is likely to be concluded in the autumn.
• Rates in relation to people with second homes who are using them as holiday accommodation, and that reduced business rates apply.
• Taxation of Trusts will be reviewed, following previous consultations. Trusts have become less popular with penal tax rates recently, and it would be unlikely to see these reversed.
• VAT will be reviewed for more technical areas, such as partial exemptions and VAT groups.

Q: What’s the difference between the new Recovery Loan Scheme and the government’s other Coronavirus support loans?

The new Recovery Loan Scheme launched on 6 April and replaces the Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Bank Loans – which both closed on 31 March and are no longer available.

•  The Recovery Loan Scheme (RLS) is available to eligible business and can be used as an additional loan on top of a CBILS or Bounce Back Loan. The scheme is open until 31 December 2021.
• You can borrow between £25,000 and £10 million with repayment terms up to six years.
• The RLS is 80% guaranteed by the government and you don’t have to have your primary home as security.
• One of the main differences between RLS and CBILS is that you have to pay the loan arrangement fees and the interest on the loan from day one.
• As with CBILS, the RLS will be administered via British Business Bank, with loans available through many commercial lenders, including high street banks.
• When you apply for support through the RLS, you will need to provide evidence that you can re-pay the loan, including; management accounts, business plan, historic accounts and details of assets.

You can hear more about the Recovery Loan Scheme and other finance, funding and cashflow advice for businesses in the latest episode of our new podcast, 2 + 2, available to download now!