‘Super deduction’ may not be the most effective use of a £25bn tax break

Chancellor’s eye-catching policy could end up rewarding investment that would have happened anyway

• Rishi Sunak flags tax rises in budget as total Covid spending tops £400bn
• Budget 2021: key points at a glance

One can usually take a mental break when the budget speech turns to capital allowances. It’s the tinkering bit. This time was different. Rishi Sunak’s “super deduction” regime will allow businesses to offset 130% of investment spending on plant and machinery against profits for the next two years. So spend £10m on new equipment and reduce your taxable income by £13m, as the chancellor put it.

It’s an eye-catching pitch to companies as they await the hike in corporation tax in 2023. The cost to the Treasury over the next two years will be £25bn, which is enormous. The Office for Budget Responsibility calculated it is 10 times more generous than the equivalent temporary capital allowance measures introduced after the 2009 financial crash.

Continue reading…

Chancellor’s eye-catching policy could end up rewarding investment that would have happened anyway

• Rishi Sunak flags tax rises in budget as total Covid spending tops £400bn
• Budget 2021: key points at a glance

One can usually take a mental break when the budget speech turns to capital allowances. It’s the tinkering bit. This time was different. Rishi Sunak’s “super deduction” regime will allow businesses to offset 130% of investment spending on plant and machinery against profits for the next two years. So spend £10m on new equipment and reduce your taxable income by £13m, as the chancellor put it.

It’s an eye-catching pitch to companies as they await the hike in corporation tax in 2023. The cost to the Treasury over the next two years will be £25bn, which is enormous. The Office for Budget Responsibility calculated it is 10 times more generous than the equivalent temporary capital allowance measures introduced after the 2009 financial crash.

Continue reading…

Chancellor’s eye-catching policy could end up rewarding investment that would have happened anyway

• Rishi Sunak flags tax rises in budget as total Covid spending tops £400bn
• Budget 2021: key points at a glance

One can usually take a mental break when the budget speech turns to capital allowances. It’s the tinkering bit. This time was different. Rishi Sunak’s “super deduction” regime will allow businesses to offset 130% of investment spending on plant and machinery against profits for the next two years. So spend £10m on new equipment and reduce your taxable income by £13m, as the chancellor put it.

It’s an eye-catching pitch to companies as they await the hike in corporation tax in 2023. The cost to the Treasury over the next two years will be £25bn, which is enormous. The Office for Budget Responsibility calculated it is 10 times more generous than the equivalent temporary capital allowance measures introduced after the 2009 financial crash.

Continue reading…