UK-headquartered MarketFinance, one of the world’s largest peer-to-peer (P2P) invoice finance platforms, notes that assisting your clients with getting back on track with their growth plans is a key priority for your accounting company.
And making use of the latest UK government financial support for recovering companies or businesses is “one way to speed up this growth process,” according to MarketFinance. The nation’s Recovery Loan Scheme (RLS) is helping to offer funding to high-potential, cash-poor firms. However, the team at MarketFinance asks whether you’ve factored the new “super-deduction” capital allowance into your planning discussions.
The MarketFinance team recently examined how super-deduction actually works. They’ve shared the “positive” longer-term benefits for customers who may be interested in buying new plant and equipment.
As explained by the company, super-deduction is a capital allowance that may be claimed by UK limited firms when purchasing new plant and machinery assets. The aim is “to reduce the expense of purchasing new costly assets and to help businesses invest in the equipment that’s needed for them to grow,” the MarketFinance team wrote in a blog post.
The allowance has been introduced by UK Chancellor, Rishi Sunak, in the Spring 2021 Budget and will “run until 31 March 2023.” With the super-deduction, clients have “the potential to cut their tax bill by up to 25p for every £1 they invest. This helps to remove the financial barriers to expansion of the business,” the blog confirmed.
It also mentioned that if a customer’s business invests in qualifying new plant and machinery assets as part of their growth strategy, the company can claim the following:
- a 130% super-deduction capital allowance on qualifying plant and machinery investments
- a 50% first-year allowance (FYA) for qualifying special rate assets.
While commenting on which assets are eligible for super-deduction, the MarketFinance team clarified:
“Not all new purchases will qualify for super-deduction, so it’s important to understand which assets are likely to be eligible. Once you have an understanding of what it can be applied to, you can maximise the impact of the allowance for your clients.”
“Most tangible capital assets that clients use in the course of operating their business can be classed as ‘plant and machinery’. It’s these essential items of equipment and infrastructure that super-deduction is aimed at. So for businesses in manufacturing, construction and agriculture, super-deduction could be a financial lifeline.”
The blog post from MarketFinance also noted that assets which qualify for either the super-deduction or the 50% FYA include the following:
- Solar panels
- Computer equipment and servers
- Tractors, lorries and vans
- Ladders, drills and cranes
- Office chairs and desks
- Electric vehicle charge points
- Refrigeration units
- Foundry equipment
This isn’t an exhaustive list of eligible assets, the MarketFinance team confirmed while adding that you will have to do your own research with HMRC and “check which of your clients’ proposed asset purchases will qualify and which rate is applicable.”
The company added:
“At MarketFinance, we believe that there is light at the end of the economic tunnel. It’s time to do more than just ‘talking recovery’ and to begin ‘talking growth’.”
Super-deduction is meant to “kickstart” a reinvestment in growth by giving UK firms a “strong incentive to make additional investments.” Instead of playing the “low-risk card,” ambitious clients can bring investments forward and “aim for growth now.” And with “the mix of capital allowances that are currently available, there’s real impetus to start investing,” according to MarketFinance.
Current capital allowances include the following:
- Super-deduction that offers UK companies the upper rate of 130% first-year relief on qualifying main rate plant and machinery investments, until 31 March 2023.
- First-year allowance (FYA) for special rate assets that offers companies the 50% rate, until 31 March 2023.
- Annual Investment Allowance (AIA) that provides 100% relief for plant and machinery investments up to a £1million threshold, until 31 December 2021.
- Freeport tax sites that allow companies to access new Enhanced Capital Allowances (ECA+).
- Freeports also allow companies, individuals and partnerships to benefit from the Structures & Buildings Allowance (SBA+), both until 30 September 2026.
MarketFinance’s blog post also mentioned that having “meaningful” or productive discussions with your customer is the one of the first steps towards a sustainable growth strategy. Circumstances might have evolved, plans could have changed and their financial position will have “become less predictable,” the blog noted while adding that you need to “re-align yourself with their situation.”
As mentioned in the update, “putting time in the diary to sit down and talk to clients is vital” and if you are going “to add value and strengthen their capital position then you need to drill down deep into their current thinking.”
According to MarketFinance, this requires the following:
- Understanding their current aims and growth plans for the business
- Knowing what plant and equipment needs to be purchased to achieve this
- Getting a handle on their current financial position and working capital
- Looking at where third-party funding and finance may be needed
- Running through the options for capital allowances
- Creating a meaningful business plan that’s tied to a funding and investment strategy
With a clear plan, access to the required capital and the potential benefits of the relevant allowances, you can “quickly green-light a client’s growth plans.”
As mentioned in the update:
“At MarketFinance, we believe that taking proactive action to keep your clients well-funded is the key to their long-term success. Our mission is to make business finance easy. We bring your accounting firm the key routes to finance that clients will need over the course of their recovery.”
The company is able to offer:
- Flex loans – where working capital is “needed to fund the client’s growth strategy, a flex loan is the ideal solution.” The client gets “up to £100,000 of flexible working capital to withdraw whenever they need it.” They can then “repay and reload their balance on a schedule that works for their business.”
- Invoice Finance – your clients can “boost their cash flow by accessing the money they’re owed whenever they need it.” They can “choose between pay-as-you-go and subscription options to release the cash value of their invoices so they can reinvest in their business.”
You may sign up to MarketFinance’s accountant partner program and offer your clients with “fast, flexible and hassle-free funding to drive their recovery and future growth.” To learn more about benefits of becoming a MarketFinance accounting partner, check here.