New temporary tax reliefs, of up to 130% on qualifying capital asset investments, have been announced by the government.
The measure has been introduced from 1st April, for companies within the charge to Corporation Tax who invest in plant and machinery. Reliefs for expenditure will be increased temporarily until 31st March 2023.
A super-deduction of 130% can be claimed on most new plant and machinery investments during this period. This is a 112% increase from the usual main rate writing down allowances of qualifying investments. A first-year allowance of 50% has also been announced for the same period and sees a rise of 44% for special rate writing down allowances.
Chancellor Rishi Sunak expressed the importance of doing more to encourage businesses to invest. The Office for Budget Responsibility (OBR) said that the super-deduction will “boost investment by £20bn a year”, according to Sunak. He said: “It is worth £25bn for the two years it is in place, this is bold, unprecedented action.”
Portia Pierrel, director at PwC, said: “This will provide not only an accelerated timing benefit but additional tax relief on expenditure incurred”. “For example, we anticipate a manufacturer incurring £10m of expenditure on a new factory to receive an additional £1m of cash tax saving over the two-year period the measure is in place” she added.
This new measure is of importance to The Allendale Group, as our Ultrasonic Cleaners and Machine Tapping arm equipment are both eligible for the reductions.
Further updates were published on 23rd March, including clarifications and more information on requirements. Financial Secretary to the Treasury Jesse Norman said: “We are making these announcements in order to increase the transparency, discipline and accessibility of tax policymaking.”