The Super-Deduction and What it Means for Landlords

Announced in the March 2020 budget and effective from the 1st of April 2021 for two years the ‘super-deduction’ allows businesses to invest in “main rate plant and machinery” and claim back a 130% capital allowances deduction.

The scheme was originally only intended for occupiers, but it has since been amended and the 2021 Finance Bill included property landlords as well.

What this means to owners and occupiers of commercial property is that enhanced allowances will be available where companies purchase or construct buildings to let, especially where they’ve fitted out with any fixtures and other assets which contribute to the functionality of the building(s).

Before the super-deduction was introduced, such fixtures already qualified for capital allowances, and therefore companies can utilise their Annual Investment Allowance (AIA) of up to £1 million (until 31 December 2021) on such expenditure, resulting in an effective 100% tax deduction if claimed within the year of purchase.

However, following the amendments to the Bill, property landlords are now able to take advantage of the 130% super-deduction for main pool assets and maintain their AIA for special rate assets. In simple terms, the amendment means claimants can now cut their tax bill by up to 25p for every £1 they invest.

The scheme is only available until April 2023, so canny landlords will need to take advantage of the new incentive promptly. Capital Allowances reviews are always best handled by specialist surveyors and tax consultants.  

For more information, please feel free to contact the CPRA Capital Allowances department on 020 7770 8000 or email info@cpragroup.com.