Super-deduction U-turn for landlords

The 130% super-deduction scheme has been amended. Landlord lessors are now included after the government changed its mind and amended the Finance Bill.

The reliefs

Companies investing in qualifying main pool plant and machinery benefit from a 130% super-deduction for the next two years, which allows £130 of relief against profits for every £100 spent. This scheme improves on the 100% annual investment allowance (AIA), especially as there is no upper qualifying limit. This will be particularly relevant once the increased AIA limit drops back down from £1 million to £200,000.

There is also a 50% first-year allowance for expenditure that falls into the special rate pool.

Landlords

Leased assets were initially excluded from both the super-deduction and the 50% first-year allowance, much to the annoyance of landlords leasing property to tenants. However, the amendment to the Finance Bill now allows plant and machinery in leased buildings to qualify for both enhanced reliefs.

Value of the super-deduction

Suppose a property company carries out a building project and spends £100,000 fitting out the property, with this expenditure qualifying as main pool plant and machinery. The super-deduction of £130,000 can be claimed against profits, generating a corporation tax saving of £24,700. This falls to £19,000 if only the AIA is available, and £3,420 for the year of expenditure if no AIA is available (and just £1,140 if the expenditure falls into the special rate pool).