Government announces super deduction tax on machinery

From April 2021 until March 2023, businesses investing in plant and machinery will qualify for a 130% capital allowance deduction. This tax break will provide 25p off company tax bills for every £1 spent on qualifying plant and machinery.

This measure – which is expected to boost UK investment by £20 billion a year – includes 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.

The ‘super-deduction’ which was announced by the Chancellor in the recent budget, is intended to spur business investment, aid post pandemic economic recovery and give the UK’s productivity levels a boost.

With no upper spending cap, any UK manufacturer looking to invest in machinery to increase the efficiency of their facility, and speed of their production lines should look to bring forward any spending plans.

While not applicable to second-hand assets the super-deduction tax is, according to tax experts, likely to benefit all businesses that are increasing their spend on capital equipment.

The move is set to boost the UK’s slow pace in moving to automation and robotics.

Over several years the fact that the UK has lagged behind G7 counterparts in the adoption of automation has allowed other countries to steal a march in leading the Fourth Industrial Revolution, and seize upon the opportunities for economic growth and jobs.

Automation has always been an enabler to streamline and enhance efficiency and manufacturers should now be able to clearly identify which areas would benefit and take advantage of the 130% tax break.

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