Super deduction tax relief for landlords and investors

Super deduction tax relief is now available for landlords and investors in certain circumstances, following an amendment to the Finance bill. Landlords and Investors were previously excluded as this tax incentive was initially only available for trading companies.

An amendment to the Finance Bill means that these sectors of the economy will no longer be excluded from claiming Super deduction tax relief for qualifying plant and machinery.

This will be a welcome relief to many landlords, who may be left with empty premises following the closure of many businesses, especially in the retail and hospitality sectors, who have particularly been impacted by the economic effect of COVID-19 lockdowns.

This amendment will mean that commercial landlords with vacant property requiring repurposing or refurbishment will be able to carry out qualifying works and claim the super deduction tax incentive of 130% and the 50% first year’s allowances against allowable costs. This could include works to contributions for tenant fitouts or landlord fitouts for commercial property, where qualifying plant and machinery is involved. It is also available for residential landlords in limited circumstances (such as for qualifying plant and machinery installed in communal areas of residential build to rent schemes)

What is super deduction?

Introduced in Budget 2021, with the aim of encouraging investment to help businesses grow as the country bounces back. This new 130% Super-deduction First Year Allowance (FYA) reduces tax by around an extra third for expenditure on new main pool plant and machinery.

In addition to this, the 50% Special Rate First Years Allowance, or SR allowance as it is known, provides an eight-fold increase of tax relief compared to the previously available 6% writing down allowance (WDA) for a variety of other plant and machinery assets.

Do be aware that these increased allowances provide a time-limited opportunity as these increased rates are only available for expenditure incurred between 01.04.21 and 31.03.23.

Super Deduction tax relief for landlords and investors – what is the change?

Landlords were previously missing out being able to claim for certain plant and machinery as the originally proposed legislation contained exclusions for plant and machinery for leasing.

Changes have now been made to the draft legislation in the Finance Bill, which means that background plant and machinery in a building should now qualify for the new allowances.

This is an attractive proposition for landlords looking to invest as there is no upper limit to these enhanced reliefs.

Super deduction for landlords – what can you claim against?

Assets that qualify for the Super deduction, that may be applicable to landlords or investors include, but are not limited to:

  • Compressors
  • Computer equipment and servers
  • Electric vehicle charge points
  • Foundry equipment
  • Refrigeration units
  • Solar panels

The super deduction could apply in several scenarios for landlords:

  • Landlord contributions to tenant fitouts in commercial property
  • Landlord fitout of commercial property
  • Fixtures installed in communal areas of multi-let commercial schemes/coworking schemes
  • Fixtures installed in communal areas of residential build to rent schemes

Note that projects should generally commerce in the April 2021 – March 2023 period, and where contractor or subcontractor is engaged, the date of the when the main contract is signed is also relevant.

Further information

If you require further information on super deduction, our recent article “Super deduction – how it works and how to maximise its use” explains in ore detail how it operates. If you require further assistance, you can also contact our team.

How Alexander & Co can assist with super deductions

Our team of corporate tax advisors are on hand to help companies navigate the complex world of capital allowances including Super deduction and corporation tax as part of our comprehensive services for companies.

We can advise on the best route forward, based on your own circumstances and advise on business structuring and the tax implications of investment. Please contact us today by completing the form below, call our office on 0161 832 4841 or email info@alexander.co.uk

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