‘Super deductor’ tax break fails to boost UK business investment
When Rishi Sunak launched a consultation last month into replacing the temporary capital spending allowance that runs out next year, the chancellor said he wanted to build on the “momentum” of what he has called the “biggest two-year business tax cut in modern British history.”
But an FT analysis shows that at just over the halfway point, the so-called “super-deduction” allowance, which offers 130 per cent relief on purchases of equipment, is not delivering.
The Institute for Fiscal Studies called it “essentially a state subsidy for private sector investment in plant and machinery” when it was introduced last April. But it has had negligible impact on a business investment slump that began after the Brexit referendum in 2016.
The tax break was designed as a coronavirus stimulus, aimed at reversing the five-year fall in capital spending and boosting productivity. It was a key part of prime minister Boris…