The Government has confirmed that the new 130% capital allowances super deduction will be eligible for use on qualifying vans and commercial vehicles, bringing significant tax benefits for fleets investing in new vehicles.
Announced in the 2021 Budget, the temporary super deduction applies for investment in plant and machinery made from 1 April 2021 to 31 March 2023 and means companies will be able to claim a 130% super deduction capital allowance on qualifying plant and machinery investments that normally get the 18% main rate writing-down allowances. It also gives a first-year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing-down allowances.
Although cars are excluded, brand-new commercial vehicles meeting qualifying conditions are included, and the Government has said the super deduction provides a “strong incentive to make additional investments, and to bring planned investments forward”.
An HMRC spokesperson said: “The super deduction will allow companies to cut their tax bill by up to 25p for every £1 they invest, ensuring the UK capital allowances regime is amongst the world’s most competitive.
“This super deduction will encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow, and to make those investments now.”
FleetCheck has said that as long as you are a limited company buying new equipment using a method of finance that means you obtain outright ownership at the end, the super deduction applies – and there is no ceiling on how much can be claimed.
The fleet software specialist also said that the super deduction presents a “major renewal opportunity” for van fleets, in particular for businesses that have been considering buying Euro 6-compliant light commercial vehicles to meet the needs of Clean Air Zones, or electric and hybrid vans as they begin EV operations for the first time.
Peter Golding, managing director, explained: “For fleets, this represents a major renewal opportunity for vans and other commercial vehicles just at the moment that we are seeing new demands are being made on operations. For example, that could include Euro 6 vehicles in some areas of the country just as new Clean Air Zones start to come into effect.
“It also means that, as electric and hybrid vans are finally starting to reach the market in quantity, that this is an ideal moment to acquire EVs and start to learn about them operationally. These vehicles often remain much more expensive that petrol and diesel counterparts but, thanks to the super deduction, the cost of acquisition is suddenly much more realistic and within reach for many more buyers.”
Also, Golding added, there were a lot of tired vans on fleets at the moment because of the demands that had been made on them during the pandemic.
“We are seeing vans that have been used in frontline pandemic fleets or home shopping that have covered a lot of miles in the last year and probably should be considered for replacement. Again, this is the ideal moment.
“While it is widely recognised that new van orders are often slow at the moment and many vehicles are in short supply, the super deduction applies for the next two tax years, until 31 March 2023, so long lead times are not really a problem.”
Golding added that businesses should seek advice from their accountants to ensure that the super deduction applied to any fleet spending they were planning.