In 2021, the UK government introduced a new tax relief scheme called the ‘super deduction’ to encourage investment by businesses. Under this scheme, companies were able to claim a 130% tax relief on qualifying investments in plant and machinery.
The super deduction scheme was designed to last for two years, starting from April 2021, and ending on 31st March 2023. However, with the UK government’s Autumn Budget announcement in November 2021, it was confirmed that the super deduction scheme would be ending as planned.
What does the end of super deductions mean for businesses?
The end of the super deduction scheme means that businesses will no longer be able to claim the 130% tax relief on qualifying investments in plant and machinery. From 1st April 2023, the standard capital allowance rules will once again apply, which allow for a 100% tax relief on qualifying investments, but without the additional 30% top-up.
Businesses that have not yet taken advantage of the super deduction scheme may wish to do so before it ends on 31st March 2023. However, it is important to note that not all investments in plant and machinery will qualify for the super deduction. The full list of qualifying assets can be found on the HM Revenue & Customs website. https://www.gov.uk/guidance/super-deduction
What impact did the super deduction scheme have?
The super deduction scheme was designed to encourage businesses to invest in new plant and machinery, in order to boost economic growth and productivity. It was hoped that this would lead to increased employment, higher wages, and stronger economic growth in the long run.
According to the Office for Budget Responsibility (OBR), the super deduction scheme was expected to lead to a £5.5bn increase in business investment in 2021-22, and a further £2.5bn increase in 2022-23. This was likely to have a positive impact on economic growth and job creation.
However, some critics have argued that the super deduction scheme may have been unnecessary, as businesses were already expected to increase investment as the economy recovers from the Covid-19 pandemic. They also argue that the scheme may have incentivised businesses to bring forward investments that they would have made anyway, rather than encouraging new investment.
The super deduction scheme was a temporary tax relief scheme designed to encourage businesses to invest in plant and machinery. Although it is ending on 31st March 2023, it is expected to have a positive impact on economic growth and job creation in the short term. Businesses that have not yet taken advantage of the scheme may wish to do so before it ends, but should be aware of the qualifying criteria.
For more information on the rules around Super Deductions click the link below:
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