Sunak Offers U.K. Companies Way to Cut Tax Bill in Next 2 Years
Comment of the Day

March 03 2021

Commentary by Eoin Treacy

Sunak Offers U.K. Companies Way to Cut Tax Bill in Next 2 Years

This note from Bloomberg may be of interest to subscribers. Here is a section:

Chancellor of the Exchequer Rishi Sunak says the U.K. will introduce a new “super deduction” to reduce tax bills for investments in the next two years.

Sunak speaks in Parliament: “For the next two years, when companies invest, they can reduce their tax bill, not just by a proportion of the cost of that investment, as they do now or even by 100% of the cost, the so-called full expensing some have called for. With the Super Deduction they can now reduce their tax bill by 130% of the cost”

Sunak gives example: “Under the existing rules, a construction firm buying £10m of new equipment could reduce their taxable income, in the year they invest, by £2.6m. With the Super Deduction, they can now reduce it by £13 million”

Eoin Treacy's view

This measure is designed to motivate companies to invest in new plant and machinery. It will create a significant boost to consumption over the next year by pulling forward any such investment from the future. It’s one of a range of measures in today’s budget aimed at promoting economic growth even as the government look at what will be required to deal with the massive rise in debt resulting from the pandemic.

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