Budget 2021 - PwC comments on super deductions

Commenting on the introduction of super deductions on businesses’ capital investment, Portia Pierrel, Director, PwC said:

“The ‘super deduction’ represents a new increased temporary tax relief for companies who invest in certain qualifying capital assets from 1 April 2021, and is anticipated to stimulate £25bn in business investment in the UK. It is expected to benefit capital intensive businesses, such as manufacturers and utilities companies in particular.

“This measure will allow a temporary first-year allowance; including a super-deduction of 130% on most new plant and machinery investments which would have ordinarily qualified for 18% relief, and a first year allowance of 50% on most new plant and machinery investments which would have ordinarily qualified for 6% relief. 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.  

“These measures will be welcomed by businesses and will encourage an immediate acceleration of investment, instead of holding off. However, care will need to be taken in relation to certain assets, such as vehicles and leased plant and machinery, which may be subject to restrictions.”

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