The government U-turn on super-deductions benefitting landlords

Aug 31, 2021 | Tax Tuesday, Taxation

Once again we look back at the announcements made in the March Budget 2021, in particular, the special rate capital allowance and super-deduction measures. (See our previous Tax Tuesday blog, Are you benefitting yet from the new super-deduction and special rate allowances? and also our Proptech blog, New Capital Allowance measures and Real Estate).

Tax Tuesday, this week wants to draw attention to the government’s U-turn, made in the recent amendment to the Finance Bill 2021, to include property landlords in the tax break scheme, allowing them to claim more generous tax relief. Property letting companies were originally excluded from the plan when it was announced and only occupiers could claim.

Who, when, what?

The original parameters haven’t changed (again, see our previous Tax Tuesday blog), so, the reliefs are only available to companies that are within Corporation Tax, private investors will not benefit from this tabled amendment.

The allowance is available on investments made on or after 1 April 2021 and before 1 April 2023 meaning landlords should act fast! The Chancellor has said that any contracts entered into before 3 March 2021, will not qualify for the new relief.

Companies who invest in ‘new and unused’ qualifying main rate plant and machinery will be entitled to either 130% first-year capital allowance deduction or a 50% first year allowance for special rate assets.

The change means that enhanced allowances are now available where companies purchase or construct a building to let out and fits it out with fixtures and other assets which contribute to the functionality of the building. However, a company can utilise their Annual Investment Allowance (AIA) of up to £1m, until 31 December 2021, as such fixtures already qualified for capital allowances. This could result in an effective 100% tax deduction in the year of purchase.

Following the above changes, landlords will now be able to take advantage of the 130% super deduction for main pool assets and maintain their AIA for special rate assets.

These latest amendments will undoubtedly be significant for landlords in the property and construction sectors and should stimulate investment in the economy. Consideration should be given to timing of development and refurbishment plans in order to maximise the ability to claim the tax reliefs.

How can we help?

For further information or to discuss your individual business needs in more detail, contact Heather Cunningham by email here or phone on 0161 905 1616.