Chancellor Rishi Sunak announced in his budget statement that, beginning in April 2021, a new super-deduction for companies investing in new equipment over the next two years.
This will cut companies’ tax bill by 25p for every pound they invest in new equipment, the chancellor said, meaning that they can reduce their taxable profits by 130% of the cost. This is worth £25bn to companies over the two-year period the super-deduction will be in full effect.
Rob Oliver, chief executive of the Construction Equipment Association, said “The announcement of a ‘super deduction’ for capital investment should stimulate decisions from companies currently undecided about their expenditure plans. For every £100 they spend they will receive a tax credit of £130. The ability to carry back company losses for three years against earlier profits will also help the cash flow of many companies.
“I believe that the ‘super deduction’ is based on a scheme successfully introduced in Slovakia. We look forward to reviewing the details, but on the face of it, it looks like it will be a great time to renew the machine fleets of plant hirers and contractors. These tax concessions are clearly a quid pro quo for swallowing a corporation tax hike in the future”.
Clive Docwra, managing director of property and construction consultancy McBains, said: “The ‘super deduction’ in tax may encourage construction firms to invest.”