During these unprecedented and challenging times, businesses everywhere have been feeling the pressure. The government have stepped in to provide grants, loans and support schemes to keep many industries going, but longer term business investment seems to be out of reach as companies big and small look to get back on their feet post-lockdown.
Rishi Sunak has been at the helm of many government-backed initiatives, and the introduction of a new tax break is currently being considered by the Chancellor to aid long term growth across the business world.
The business tax breaks currently available
The Annual Investment Allowance (AIA) is the only form of capital allowance tax relief available at present. Using the allowance, companies, sole traders and partnerships can access relief on the first £1 million spent on business equipment. This tax break was introduced back in 2008. After a two-year extension and a temporary increase from £200,000 to £1 million in January 2019, AIA is due to come to an end this December.
With the AIA, you cannot claim relief on longer term investments but it can be claimed for most plant and machinery valued up to the current AIA limit.
New measures to aid investment in growth
Understandably many businesses may be reluctant to part with cash and invest it into the long term growth of their company. According to recent reports, the Chancellor is considering offering a full tax break on capital investment, meaning companies will not have to pay tax on investments in machinery, technology and industrial property.
The move will mean that for the first time ever, companies can access relief on purchases made to ensure long term growth.
How the new tax break could help
Since plans for the new tax relief were revealed, many supporters have spoken out in its favour. The new measures will mean companies can make the long term investments they need to enhance future growth whilst freeing up cash in the short term. This could in turn aid employment rates and boost wider economic recovery.
The tax relief is predicted to be a temporary measure and is expected to be announced in the Chancellor’s Autumn Budget.
If you’re a business that’s looking to prepare for the months ahead or would like to find out more about the financial support available to you, our accounting experts can help. With more than 30 years of experience under our belts, we are well known for delivering cost effective accounting services to clients big and small. Contact us today for further advice and support.