Buy computer equipment before super-deduction ends on Friday, directors advised

The clock is loudly ticking down for limited company directors who want to buy computers, IT equipment, and desks or chairs in the least taxing way possible.

On March 31st 2023, the currently in-place ‘super-deduction’ which permits directors to buy such items and then use their corporation tax return to claim back 130% of the cost, is ending.

In place of the super-deduction -- ‘the best name ever for a big tax break’ says accountant Tyler Lappage, clearly sad to see it go, will be ‘full expensing,’ with its smaller deduction of 100%.  

'Probably better to do it in March'

“[Only a few] days left to take advantage of it,” Lappage of accountancy firm Nabarro Poole said of the super-deduction in an online reminder.

“So if you’re thinking of investing in capital equipment in the next six months, it is probably better to do it in March, then after that; 130% tax relief compared to 100% from April.”

Capital equipment which qualifies for the 130% deduction is listed by HMRC, but vans, office chairs/desks and computers/IT equipment including servers, are the typical areas for PSCs.

'Clearly not as good'

“There are plenty more types of qualifying equipment...[but these] three categories…are likely to be the most popular for small limited companies,” says accountant Frances Conn.

Asked if the less generous ‘full expensing system’ really is cause to buy now and definitely before Friday, Conn, of Figureweave Accountancy last night told ContractorUK:

“A system where you can only claim back 100% compared to one that claims back 130% is clearly not as good.”

'Get ahead of the March 31st deadline'

The 30 per cent difference explains why Conn’s clients “have been buying equipment they needed…just to get ahead of the deadline.”

With an eye on the equipment eventually becoming unwanted, the accountant added: “When you sell the equipment, you’ll have to refund 130% of the sale price in your corporation tax return.

“[There is] no problem using the super-deduction for most computer equipment as its sale price is usually next to nothing when you sell it!

“However second-hand vans can sell for large amounts of cash if they’re reasonably new, so you may want to reconsider using the super-deduction option for them.”

'£23 saving per MacBook purchase'

A contractor accountant, Alan Broome, isn’t so sure that rushing is really worth it – even if some directors’ corporation tax bill might leap by up to 7.5% from April 1st.

In a post yesterday concerning a single laptop purchase, Mr Broome, boss at Acumenica started with: “50k capital expenditure now, would save £12,350 in corporation tax; £50k x 130% x 19%. Next year, relief would be £13,250; £50k x 100% x 26.5%.

“Or, to be more prosaic, if you bought a £1,300 MacBook this month instead of next, you’d save £23. A saving yes, but hardly worth the song and dance”.

At Figureweave Accountancy, Conn maintained: “Don’t go mad if you don’t really need the equipment. But if you do, now’s the time to buy it. If in doubt, ask your accountant.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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