Landlords are being urged to take advantage of what has been described as the most attractive tax incentive for business investment ever offered by the British government.
Under the super-deduction, any investments a business makes in main rate plant and machinery now qualify for a 130% capital allowance deduction.
When the scheme was first announced in March, property letting companies – property landlords operating through a limited company – were excluded, meaning that only occupiers could claim.
But a government U-turn in the Finance Bill ruled that property lettings firms are now eligible.
However, the scheme is only available until 1st April 2023, so landlords need to move fast, advises Stuart Grimster, head of property & construction at tax consultancy Old Mill.
“Landlords have been brought into the frame, and when you consider that under the new rules, a property landlord incurring £1m of qualifying expenditure can save almost a quarter of a million pounds on their corporate tax bill, you can see why this change is so significant,” he says.
A company incurring £1m of qualifying expenditure can deduct £1.3m (130% of the initial investment) in computing its taxable profits, saving it up to 19% of that – or £247,000 – on its corporation tax bill.
But, says Grimster (pictured), expenditure needs to be incurred – which means an unconditional obligation to pay has arisen – on or after 1st April 2021 but before 1st April 2023 on ‘new and unused’ plant and machinery.
“The Chancellor has said that any contracts entered into before 3rd March 2021, regardless of when the unconditional obligation arises, will not qualify for the new relief. If you have any questions about the super-deduction.”