The government recently announced a new super deduction tax relief, coming into force this month, April 2021. This tax deduction could cut companies’ tax bills by 25 pence for every pound they invest in new equipment. This would mean reduced taxable profits by 130% of their cost. A key point to be aware of is that the relief is uncapped, this is unheard of and how companies with old, tired fleets can truly benefit. It is also key to know that the type of funding you use to acquire vehicles and equipment, must be where you obtain outright ownership at the end of the finance period.

The government has decided to encourage businesses to invest in infrastructure to support the country’s economic recovery and lead the movement towards lower polluting vehicles. If you understand super deduction you will not only benefit from tax relief, but many other advantages that can be gained by replacing an ageing fleet.

With a new fleet and new equipment, your fleet performance will improve with improved fuel consumption, reduced maintenance costs and less Co2 emissions. Reducing Co2 is something that all businesses need to look at as Clean Air Zones, Low Emission Zones and Ultra-Low Emissions Zones become more prominent. It is important that company vehicles can enter and navigate freely through these zones, so they do not lose out on business, or have to pay fines for driving in an area that has a charge. New vehicles will also be more reliable, so you are not having to waste time and money on breakdowns and hours in garages.

Company image is an area that is not hugely talked about, but new, up to date, low emission vehicles that are more sustainable will lead to an enhanced company image and help engage your drivers. With concerns for the environment at record highs (YouGov), sustainability is a large factor that people will consider when looking to employ someone or when recommending your service to friends and family.

It is clear to see that this new relief provides an opportunity for many businesses. The next two years will be very critical for all fleets, especially those who are looking to renew their equipment. Those willing to invest in super deduction could benefit from a large reduction in corporation tax as well as vast savings in the long term; even seeing benefits within a couple of months of new vehicles being used.

However great all the benefits sound it is important to be aware of all the criteria; for example, you cannot use the super deduction to buy used equipment, it must be brand new. Therefore we do recommend seeking professional help and guidance before you commit to high levels of expenditure, to ensure that the decisions you are making are beneficial to your business.