Budget 2021: Super Capital Allowances

In what was seen my many as a Budget lacking in ideas to kick start the economy back into life, Rishi Sunak’s announcement of a notional 30% uplift to eligible capital allowances headlined as the proverbial ‘rabbit out of the hat’. The tweaked allowances will give businesses purchasing brand new plant and machinery more tax relief. At present, if a company spends £100,000 on such items, it’s corporation tax liability is reduced by £19,000. Under the new rules, if this expenditure falls between 1 April 2021 and 31 March 2023, the same spend will reduce corporation tax by £24,700.

It is hoped that this super-deduction will encourage businesses to invest in the following productivity-enhancing plant and machinery assets that will help them grow, and for businesses to make those investments now:

• Solar panels
• Computer equipment and servers
• Tractors, lorries, vans
• Ladders, drills, cranes
• Office chairs and desks,
• Electric vehicle charge points
• Refrigeration units
• Compressors
• Foundry equipment

The Chancellor follows a well beaten path of operating the lever of capital allowances to try and stimulate CapEx spending by businesses. George Osbourne did similar in 2012, when he increased the Annual Investment Allowance from £25k to £250k to try and head off a triple dip recession. And it worked.

Blog entry by: Ian Piper