The government has launched new initiatives to boost support for UK businesses and improve their investment after the disastrous impact the pandemic left on the economy.

In March 2021, the Chancellor Rishi Sunak announced the new super-deduction capital allowance scheme to reduce the taxes for companies investing in qualifying equipment in the first year.

He said the tax reduction initiative is a “direct way to help businesses invest”, which will then “drive growth in the economy”.

The super-deduction capital allowance will enable companies buying new plant and machinery assets to qualify for a 130 per cent capital allowance deduction from April 1^st 2021 till March 31^st 2023.

It is hoped this will reduce taxes by up to 25p per £1 invested, encouraging businesses to purchase the likes of computer equipment, tractors, lorries, office chairs, compressors, refrigeration units, vehicles for trading purposes, foundry equipment and drills, which will help them develop their own business as well as invest in another one.

In addition to this, there will be a special rate allowance, allowing businesses to claim a 50 per cent first-year deduction for qualifying special rate assets. This includes integral features in buildings and long-life assets, such as cold water systems, lifts or escalators, solar panels, or an electrical or water heating system.

The government introduced the reliefs due to the declining levels of business investment since the pandemic, having fallen by 11.6 per cent from the third quarter of 2019 to the same period in 2020.

It is believed that low business investment leads to a drop in output, with the government stating this has been the cause of the slowdown in productivity growth since the economic crash of 2008.

Therefore, this incentive will not only help businesses recover and develop following the pandemic, but also boost their productivity and improve the overall economy.

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