Covid Tax Breaks – Don’t miss out!

With increasing living costs and inflation currently at 9.4%, now is more important than ever to protect cashflow and make the most of tax relief available to businesses, as well as employees.

Super deduction on plant and machinery

Companies investing in capital assets are currently able to claim 130% super-deduction capital allowances on the purchase of plant and machinery. This relief has been available since 1^st April 2021 and will continue to be available until 31^st March 2023.

The Annual Investment Allowance is another tax relief available that allows 100% of the cost of the purchase to be set off against profits in the year of acquisition to decrease the tax payable.  The AIA amount has temporarily been increased to £1 million since 1^st January 2019 and was due to revert to its previously permanent rate of £200,000 on 31^st December 2021 but due to COVID-19, this was extended to 31^st March 2023. There has been no announcement so far on what the revised limit will be from 1^st April 2023, but it is likely to be significantly reduced.

With both reliefs coming to an end on 31^st March 2023, it is extremely important to ensure that any companies considering an investment, do so before the relief ends to make the most of the tax savings available.

Loss carry back

Under current corporation tax rules, companies can offset trading losses against total profits in the same period. Any unused balance of losses can be set off against profits in the previous 12 months, or it can be carried forward and set against total profits in the following accounting periods.

For accounting periods that end between 1^st April 2020 and 31^st March 2022, an extended loss carry back period of three years is available. Therefore, where a company has been profitable previously, but suffered a loss in their most recent accounting period, the company may be able to claim a corporation tax refund by carrying back the loss suffered.

For sole traders and partnerships, the three-year loss carry back relief is also available and can be claimed via the self-assessment tax return.

Work from home allowance

If you are required to work from home, you are able to claim for increased costs for example, heat, electricity, water and phone bills for the time that you are required to work from home. However, due to the pandemic, the government announced a scheme where even if you were only required to work from home for one day during the 2021/22 tax year, you are able to claim the tax relief for the entire year. This relief was also available in the 2020/21 tax year and as a result this means that the two years tax saving could save individuals up to £280 a year.

If you would like more information, please get in touch with Misty Nickells on 01392 241228 or email misty@griffinaccountancy.co.uk