It has been a year since Rishi Sunak, the then Chancellor, announced the super-deduction as part of his vision for an ‘investment-led recovery’ in the UK. Mr Sunak further announced in the 2022 Spring Statement that changes to the capital allowances regime are to be considered and detailed in the Autumn Budget. A key aim of the super-deduction was to make the UK tax regime for business investment truly world leading.
The Government has over time used lucrative tax reliefs to incentivise businesses to invest in capital assets and properties. When the super-deduction was unveiled it demonstrated how the UK tax system can have a significant role to play in boosting business investment and innovation in the UK.
The super-deduction was heralded as a tax relief that would spur business investment, boost the post-pandemic economic recovery, and improve productivity levels in the UK. It is unrivalled and viewed as being the biggest business tax cut in modern British history and over the two-year period it is in force, is estimated to be worth £25bn.
The super-deduction has certainly created a buzz and is ensuring the UK capital allowances regime is amongst the world’s most generous, enabling companies to cut their tax bill by up to 24.7p for every £1 invested. The super-deduction is a 130 per cent first year allowance for qualifying expenditure on main pool plant or machinery assets. In addition, there is a 50 per cent first year allowance on qualifying expenditure on special rate pool plant or machinery assets.
The two-year period when the expenditure must be incurred is between 1 April 2021 and 31 March 2023. There are nuances to claiming the super-deduction that need to be carefully considered to ensure any claims made have a robust and supportable basis. To ensure tax reliefs are claimed in the most efficient manner, specialist advice should be sought in order to maximise the tax relief available from the super-deduction and to balance it with other capital allowances reliefs that are currently in force.
Research undertaken by the Confederation of British Industry (CBI) suggests that 53 per cent of firms plan to claim the super-deduction, and half of the 325 companies surveyed from different sectors, said they would revise future investment plans if the relief was made permanent. The CBI has suggested that a successor to the policy could boost UK business investment by up to £40bn each year by 2026.
It would seem that the super-deduction is leading the way for the Treasury to consider introducing further investment boosting tax reliefs. We will have to wait in anticipation for the Autumn Budget to hear what plans are in place to help encourage businesses to make capital investments by providing lucrative tax incentives, which in turn will increase the UK’s productivity and growth.
We have a dedicated team of capital allowances experts. To discuss the super-deduction, and any other Capital Allowances reliefs, get in touch with our head of Capital Allowances, Aulfat Bi (pictured), via firstname.lastname@example.org