Companies can currently claim super-deduction allowances set at 130% of the cost of new plant and machinery or 50% of the purchase cost of certain fixtures and fittings for buildings. These super-deductions will expire on 31 March 2023.
The annual investment allowance (AIA) cap was due to be reduced from £1m to £200,000 on 1 April 2023 but will now be fixed at £1m permanently. The AIA can be claimed by any form of business and can apply to second hand equipment as well as items purchased brand new. Some 99% of businesses will be able to claim a full deduction for the cost of plant and machinery using the AIA.
The rates of deduction available under the R&D schemes for SMEs are being reduced partly to take into account the changes in corporation tax rates from 1 April 2023 but also because of perceived widespread abuse of the schemes.
Companies using the SME scheme will see the allowable deduction reduced from 130% to 86% and the payable tax credit reduced from 14.5% to 10%.
Large companies that use the R&D expenditure credit scheme will be able to deduct an increased credit of 20% instead of 13%.
The investment zones proposed by the previous administration will go ahead in a limited number of areas but they will not attract tax reliefs such as reductions in business rates or employers’ NIC.