Blog: How the super tax deduction scheme can support purchases
In the first of our new blog series Nigel Dent, Connected Energy Head of Sales looks at the new temporary tax reliefs in the UK and how they could support purchases including energy storage systems.
The governments new super tax deduction scheme announced in March aims to help with offsetting up to 19% of capital expenditure to stimulate business investment. It does so by increasing the incentive to invest in plant and machinery by offering higher rates of relief than were previously available.
How does the super-deduction work?
For expenditure incurred from 1 April 2021 until the end of March 2023, companies can claim 130% capital allowances on qualifying plant and machinery investments.
Under the super-deduction, for every pound a company invests, their taxes are cut by up to 25p. A major difference, and presumably why it is called a ‘super-deduction’, is that the allowance is worth more than what you paid for the asset.
This measure is expected to have a significant impact on an estimated 2.8 million companies that incur qualifying expenditure on plant and machinery. The super-deduction will give companies a strong incentive to make additional investments, and to bring planned investments forward.
That sounds great, what is covered under the scheme?
Most tangible capital assets used in the course of a business are considered plant and machinery for the purposes of claiming capital allowances.
There is not an exhaustive list of plant and machinery assets. The kinds of assets which may qualify for either the super-deduction include, but are not limited to (source):
• Solar panels
• Computer equipment and servers
• Tractors, lorries, vans
• Ladders, drills, cranes
• Office chairs and desks,
• Electric vehicle charge points
• Refrigeration units
• Foundry equipment
Battery energy storage systems also qualify as new plant and machinery: meaning that by purchasing through this scheme you could save 19% of your system cost.
Why do we need energy storage?
Battery energy storage systems can help you reduce costs, trade energy, optimise the use of your own on-site renewables, reduce peak loads and support the integration of EV charging infrastructure.
As the country continues to build back from the pandemic the focus more than ever is on a green recovery: “My government will invest in new green industries to create jobs, while protecting the environment,” the Queen said in her address to the House of Lords earlier this week, “The UK is committed to achieving net zero greenhouse gas emissions by 2050, and will continue to lead the way internationally by hosting the COP26 summit in Glasgow.”
Focusing on net zero emissions is crucial hence why momentum has been building towards renewable and decentralised energy sources for the country. However much renewable energy relies on harnessing the weather which is harder to control than a power stations output. Maintaining the national energy requirements can be tricky as the amount of energy available needs to be equal to the varying amount of energy required at any one time.
Energy storage which can provide stability services to support the national grid can bring in new revenues to your organisation, as well as helping the green energy transition.
I’m interested, what next?
Get in touch, we’d be happy to discuss your needs in an initial session before potentially offering a free desktop feasibility study to look at how energy storage could support your organisation.
We recommend that you speak to your own accountancy and/or finance functions to ensure your organisation could benefit from the super deduction scheme.