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Budget 2021: property tax incentives and the super-deduction

Gateley Capitus

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This year’s Spring Budget made for interesting watching, particularly if you are planning to spend money on commercial property during the next two years.  The Chancellor announced a super-deduction for all main pool plant and an uplifted write-off for special rate plant and machinery.

Unfortunately, these rules only apply to owner occupiers and tenants but not to landlords due to a restriction for first-year allowances. They also are not available for income tax sole traders, partnerships or LLPs.

Super-deduction for all main pool plant

For main pool plant, a 130% super-deduction applies from April 2021 until March 2023.  This allows for an additional 30% over and above the amount of the spend.  What this means in practice is that instead of writing-off main pool plant at an annual 18% you will now write-off the total amount at once and receive an immediate additional 30% tax relief on top.

An uplifted write-off for special rate plant and machinery

Special rate pool expenditure, on what is commonly known as ‘integral features’, such as electrical and cold-water systems and lifts, also received an investment boost. Instead of the usual 6% writing down allowance, for the next two years, the expenditure will benefit from a 50% first-year allowance so immediate tax relief is available for half of the spend.

These reliefs are for new and unused plant and machinery, not second-hand assets.  So, they will not be available for property purchases, except new assets bought unused from property trading developers.

There is an important caveat, these new reliefs only apply to building contracts that were entered into from the day of the budget, 3rd March 2021, and expenditure must be after 1 April 2021.

The other property tax incentives available 

  • The 100% annual investment allowance for plant and machinery remains at £1m until 1 January 2022, when it expected to reduce to £200,000 per year.  But this was recently extended into its current (third) year, so Government plans might change for it to run for another (fourth) year
  • Structures and building allowances are available for most of the remaining building (after main and special rate pools) for construction projects where the contract was entered into after 28th October 2018.  The relief is available at 3% per annum.
  • The opportunity remains to claim for certain integral features when expenditure on property was incurred after 31 March 2008. This applies even where the seller claimed all allowances available before April 2008.
  • Enterprise Zone first-year allowances of 100% remain available for ’new’ investment in plant or machinery within certain disadvantaged geographical locations called designated assisted areas.
  • Land remediation tax relief (LRR) gives a tax deduction of 150% of qualifying expenditure or losses can be converted into a cash payment from HMRC worth 24p in the pound of qualifying spend.  LRR includes expenditure on cleaning-up brownfield sites and buildings including the treatment and removal of Japanese knotweed (excluding removal to a landfill site) and expenditure on long term derelict land.  

Would you like more information on what this years spring budget means for commercial property?

If you would like further information in regards to what this years spring budget means for those who are planning to spend money on commercial property during the next two years, please contact our experts listed below.

Is the new capital allowances 130% 'super-deduction' actually super?

Register for our webinar taking place on Tuesday 30th March where our experts will consider what the super-deduction really means and how it will affect the tax incentives available.

Register now
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