Tax call

New super deduction could spark £40bn investment

Tony Danker
Tony Danker: ‘we need to bold’

Business leaders say extending the Government’s super deduction could boost UK business investment by up to £40billion a year by 2026.

The CBI is urging the Chancellor to create a permanent 100% tax deduction for capital spending in this year’s Spring Statement to succeed the allowance that is due to expire in March 2023.

Companies can claim 130% capital allowances on plant and machinery investments that would usually qualify for 18% tax relief.

The CBI warns that If the super deduction expires without a successor, the UK will remain the lowest in the G7 for business investment by 2026.

Data compiled from 325 firms suggests the super deduction has spurred investment and that a permanent incentive could trigger an annual 17% uplift in capital spending. This could turbo-charge growth ambitions, helping raise productivity and improve living standards across all UK nations and regions, says the CBI. 

Its survey reveals that more than half of respondents took advantage of the super deduction – or plan to do so – to increase or accelerate capital investment plans.  

Tony Danker, CBI director-general, said:  “The Chancellor’s super deduction exemplified the boldness in public policy that we need to inspire investment and get the economy moving.

“Going by our survey results, it looks to be a real success. It’s started the job but cannot be a one-hit wonder. Evolving the policy from short-term fix into long-term strategy will give firms confidence that Government and industry are aligned.

“The UK is facing the highest tax burden in decades. But by rewarding firms who put money into their operations, we can unleash new innovation and productivity – the ingredients we need to escape the low-growth trap and build a stronger, sustainable and more equitable economic future.”

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