Why 2022 is a good time to invest in new machinery and equipment
The super-deduction, part of a series of measures announced in the government’s budget back in March 21 and designed to boost the UK’s post-pandemic recovery, could see companies save up to 25 pence for every one pound invested.
Announcement of the super-deduction, which came amid a raft of other significantly more headline-grabbing figures and statements in Chancellor Rishi Sunak’s budget speech, seems to have passed many by. If you were one of those who missed it, here, Antalis’ head of automation and systems, Stuart Bates, gives a brief overview and shares his insight into why there has never been a better time to invest in new packaging machinery.
The new 130% Super-Deduction capital allowance is available on qualifying plant and machinery investments with expenditure incurred from 1 April 2021 until the end of March 2023. The government hopes that “this super-deduction will encourage firms to invest in productivity-enhancing plant and machinery assets that will help them grow”1. According to the government website:
- Under the super-deduction, for every pound a company invests, their taxes are cut by up to 25p.
- This change makes the UK’s capital allowance regime more internationally competitive, lifting the net present value of our plant and machinery allowances from 30th in the OECD to 1st.
It’s a window of opportunity that Stuart believes has come at exactly the right time for packaging and logistics operations: “The last 18 months or so has been tough for many businesses, but for those involved in packaging goods for distribution the challenge has been to cope with increased demand arising from the acceleration in online purchasing aligned with shortages in labour and some packaging materials. For many Antalis Packaging customers, investing in machinery has enabled them to not only keep afloat but to thrive.”
Last year, Antalis Packaging helped a leading UK retailer to step up their packaging of smaller items to cope with the unprecedented growth. Despite having invested heavily in carton automation over the years, the company was still packing smaller items manually. On average, their packers were packing 1.5 bags per minute but, with peak demand increasing to over 40,000 bags per day, the company was going to struggle to increase the number of temporary workers and maintain social distancing.
Antalis Packaging recommended the PACjacket automated packaging system, a high speed, on-demand bubble mailer system capable of producing up to 20 bags per minute. The machine adjusts the bag size in line with the contents, which helps to reduce material waste, plus the smaller pack size means more packs can be loaded onto a delivery vehicle.
Under the 130% super-deduction, if a company were to invest, for example, £75,000 in an auto-bagging machine such as PACjacket, the deduction against company profits for tax would be £97,500 compared to a tax saving of just £18,525 at standard 18% corporation tax – a significant saving.
“Investing in machinery can usually pay back dividends in no time under normal circumstances, but the 130% super-deduction should make the decision to invest a much easier one. I would urge any business that has been thinking about investing in machinery but has not yet pressed the button to contact us to discuss their requirements and take advantage of the support the government has made available.”