The 130% capital allowances super-deduction that comes into effect on April 1 presents a “major renewal opportunity” for van fleets, FleetCheck is forecasting.
The fleet software specialist says that businesses who 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 now have an ideal moment.
The super-deduction offers 130 per cent first-year relief on qualifying main rate plant and machinery investments from April 1 2021 until March 31 2023 for companies.
For most business equipment, there will be a super-deduction of 130 per cent of the expenditure incurred. This will mean that on a spend of £100,000, the corporation tax deduction will be £130,000, giving corporation tax relief at 19 per cent on £130,000, which is £24,700.
Normally such expenditure would either fall within a company’s annual investment allowance and produce relief of only £19,000 or alternatively be tax-relieved at 18 per cent of the cost per annum.
Nigel May, partner at MHA MacIntyre Hudson, said: “Companies looking to use this relief will need to take care when the assets that the expenditure relates to are sold: tax charges may then arise clawing back the relief. It is perhaps worth noting that certain expenditure is excluded, in particular the acquisition of company cars.”
Peter Golding, managing director, said: “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.
“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.”
He added that 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.”
Businesses should seek advice from their accountants to ensure that the super-deduction applied to any fleet spending they were planning.