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.

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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.”

More information on the tax break.

Read this tax guide.

2 COMMENTS

  1. I will make two comments –
    1) For most residential landlords capital allowances do not apply
    and
    2) Its fine regarding capital gains whilst within the company structure but if you want to get that gain personally there is in effect a double charge to taxation – tax on the property gain and tax getting the money out of the company. Remember a company is an entity in its own right and not yours or your money.

  2. The ‘super deduction’ is available on all ‘qualifying expenditure’.

    As Barry has commented, the problem that landlords have is that the term qualifying expenditure, in the main, does not cover residential landlords.

    Single tenanted houses are outside the scope.

    HMOs are outside the scope – except for communal areas.

    Serviced accommodation is inside the scope.

    Holiday lets are inside the scope.

    So, it would be quiet unusual for a PRS landlord to be able to claim.

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