The Institute of Directors (IoD) has called on the government to extend the capital allowances super-deduction.
Between 1 April 2021 and 31 March 2023, companies investing in qualifying new plant and machinery will benefit from new first year capital allowances.
Under this measure a company will be allowed to claim:
- a super-deduction providing allowances of 130% on most new plant and machinery investments that ordinarily qualify for 18% main rate writing down allowances
- a first year allowance of 50% on most new plant and machinery investments that ordinarily qualify for 6% special rate writing down allowances.
The relief is not available for unincorporated businesses.
Data published by the IoD found that the super-deduction has had ‘a positive and measurable impact’ since it was introduced at Budget 2021. 13% of firms reported that the super-deduction had had a direct impact on their level of investment undertaken between 2021-23. For half of these businesses, it was entirely new investment as a direct result of the super-deduction.
The business group is urging the government to make the super-deduction permanent.
Kitty Ussher, Chief Economist at the IoD, said: ‘It is wrong to look at declining overall levels of business investment in recent months and conclude that the super-deduction has not worked. Instead, our data shows that even less investment would have taken place if the super-deduction did not exist.’
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