Adam Senior

The CBI group is calling for a permanent " super-deduction" tax break to boost business investment in the UK.

The super-deduction allowance currently gives businesses investing in certain types of equipment, like machinery, a much higher tax reduction than usual.

It was introduced at The Spring Budget Last Year , but is due to expire in March 2023.

" It's started The Job but cannot be a one-hit wonder, " CBI director general Tony Danker said.

The Treasury acknowledged the tax system has an important role to play in boosting business investment and Innovation .

, it was described as necessary " bold, unprecedented action to get companies investing".

Between 2020 and 2021, business investment was 12% lower than 2019 pre-coronavirus pandemic levels,

Mr Danker said: " The chancellor's super-deduction exemplified the boldness in public policy that we need to inspire investment and get the economy moving. "

" Evolving the policy from short-term fix into long-term strategy will give firms confidence that government and industry are aligned, " he added.

The policy allows companies, but not individuals, to claim 130% relief against investments they make in new plant and machinery items between 1 April 2021 and 31 March 2023.

For example, if an eligible company spent £100,000 on computer servers, commercial vehicles or office furniture, they would be able to claim £130,000 against their profits subject to corporation tax.

Recent research by the CBI suggests that 53% of firms plan to claim the super-deduction.

Of the 325 companies it surveyed across different sectors, half said they would also revise future investment plans if the relief were made permanent.

The CBI suggests that a successor to the policy could boost UK business investment by up to £40bn a year by 2026.

It called on the government to consider the extension in an effort to increase Productivity , particularly ahead of the upcoming rise in The Corporation tax main rate to 25% for profits over £250,000.

" Firms are facing the highest tax burden in decades, " Mr Danker said.

" 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. "

The Institute for Fiscal Studies (IFS) has also previously said that the tax break seems " to have been chosen specifically to counteract this disincentive - allowing 130% of expenditure to be deducted with a 19% tax rate is almost exactly equivalent to allowing 100% of it to be deducted with a 25% tax rate. "

But Stuart Adam, senior research economist at the IFS, warned Last Year that the relief could also be open to Tax Avoidance , or even fraud, " as companies essentially try to find ways to dress things up as plant and machinery investment to get this generous deduction".

The CBI is calling on the government to consider a permanent deduction of 100% as part of its proposals to boost Economic Growth .

In response to the CBI's new research, a Treasury spokesperson said: " The Chancellor announced the super-deduction last March to unlock business investment to spur our economic recovery from the pandemic - and the CBI's analysis reflects this.

" The super-deduction is helping to power our recovery, and We Are the fastest growing economy in the G7 this year. "

Source of news: bbc.com