A property tax specialist has urged Chancellor Rishi Sunak to rethink his super-deduction giveaway announced in the Budget as it is “grossly unfair” on agriculture and other sectors.
The £25 billion measure was hailed as the ‘biggest business tax cut in modern history’ – allowing companies to reduce their tax bill when they invest in their business by 130% of the cost.
However, the flagship policy has been branded a missed opportunity after closer analysis by Hampshire-based property tax specialists E3 Consulting because it excludes some types of businesses.
Managing director Alun Oliver said: “The super-deduction was heralded as the Chancellor’s ‘rabbit out of the hat’ at the Budget.
A new and untested enhancement to the UK capital allowances regime, it is clearly intended to encourage companies to expedite any investment and the government no doubt wants to see it act as a catalyst to wider economic activity.
“While any boost to capital allowances is always welcome, on closer examination it is disappointing to see the measure only applies to companies who are subject to Corporation Tax.”
‘This appears to be grossly unfair’
Oliver continued: “This appears to be grossly unfair, given that much economic activity is through other corporate entities such as Limited Liability Partnerships [LLPs], individuals or ‘old style’ partnerships.
“GP surgeries, engineering firms and professional services including lawyers and architects are all among those often structured as LLPs as well as the UK farming sector – all of which will not benefit.
Furthermore, a great deal of property investment is carried out through LLPs. As it stands, the super-deduction represents a missed opportunity to encourage even greater investment.
“I urge the Chancellor to think again and consider inclusion of those corporate entities which are set to miss out.”
Under the super-deduction, from April 1, 2021 until March 31, 2023 companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance.
For example, a company investing £10 million will be able to reduce its overall taxable profits by £13 million.
According to Companies House, there are more than 50,000 LLPs in the UK, plus more than 50,000 Limited Partnerships.
