Investment in the UK’s manufacturing sector is poised to rise as a result of the capital allowances super-deduction.
The super-deduction enables companies that invest in qualifying new plant and machinery to benefit from a 130% first-year capital allowance.
The policy kicked in on 1 April 2021 and allows companies to cut their tax bill by up to 25p for every £1 they invest in qualifying business assets.
Investing companies will also benefit from a 50% first-year allowance for qualifying special-rate (including long-life) assets.
In the UK’s manufacturing sector, research suggests that most companies are planning to raise investment levels in 2021/22.
A study from Make UK found 23% of companies plan to increase investment levels, while 28% are speeding up investment plans.
However, 49% said the super-deduction would not incentivise them to raise their investment plans or their plans were too rigid.
The policy was announced in the Budget on 3 March 2021, with the Office for Budget Responsibility expecting it to boost company investment by 10%.
Verity Davidge, director of policy at Make UK, said:
“The Budget made a clear impact on manufacturers in terms of confidence and they are stepping up their plans to invest in response.
“For too long the UK’s investment performance has been below par and the [super-deduction] incentive should provide a boost in the short-term at least.”
We know capital allowances inside out.
