The new capital allowance ‘super-deduction’ could help businesses boost investment and productivity, but only if they start planning now, experts have warned.

The report comes after the announcement of the Budget 2021 measure which will help companies invest in new equipment.
Launching on 01 April 2021, businesses investing in qualifying new plant and machinery assets will be allowed to claim a 130 per cent super-deduction capital allowance, as well as a 50 per cent first-year allowance for qualifying special rate assets.
Effectively, it means that companies can cut their tax bill by up to 25p for every £1 they invest in qualifying equipment.
The £25 billion measure follows research suggesting that business investment fell to record levels in the third quarter of 2020, down 11.6 per cent compared to the same period a year before. 
The Government hopes the policy, which ends on 31 March 2023, will “spur” post-pandemic growth by incentivising investment now.
“Making capital allowances more generous works to stimulate business investment,” said HM Treasury.
“As a result, these measures can promote economic growth and counter business cycles. The super-deduction will give companies a strong incentive to make additional investments, and to bring planned investments forward.”
Welcoming the scheme, the Institute of Chartered Accountants in England and Wales (ICAEW) said it was the first time the Government has introduced a rate of capital allowance relief that exceeded 100 per cent – making it an attractive measure.
However, investing too early or too late or disposing of an asset before the end of the regime could “end up costing you more in tax than you got a deduction for”, warned Richard Jones, ICAEW Business Tax Manager.
“Given the limited lifespan of the tax break and the timings involved in decisions on expenditure on plant and machinery, companies should start planning now.
“If you’re thinking of making any investments in plant and machinery, think about bringing it forward to take advantage of this regime.”
You can learn more about the new capital allowance ‘super-deduction’ here.
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