Incorporated Landlords get unexpected investment tax boost

A change in government policy will allow landlords to fund investment that will help businesses recover, says tax and advisory firm Blick Rothenberg

Corporate tax director Helena Kanczula says: “ A welcome announcement on Budget Day was a ‘super tax deduction’ designed to boost investment for expenditure incurred by businesses between April 1 2021 and March 31 2023.

“But landlords a were left out in the cold despite operating in one the key sectors which will need to invest heavily post pandemic.”

She adds: “The Treasury has clearly listened to the concerns of company landlords and has now made amendments to the draft Finance Bill legislation to ensure that property lessors are not prohibited from claiming these tax incentives which will be a real boost to the sector.”

From April 1 2021 to March 31 2023 landlords who invest in qualifying plant and machinery assets will now be entitled to either get a 130 per cent first year capital allowance or a 50 per cent first year allowance for assets that qualify for the “special rate” such as electrical and lighting systems, lifts and air-conditioning.

An investment of £100,000 which qualifies for the 130 per cent would be worth tax relief of £24,700 in the first year resulting in a significant cash tax saving.  For expenditure qualifying for the 50 per cent deduction the tax relief would be accelerated by up to £9,500 of the amount invested.

Kanczula adds: “It is encouraging that the concerns of businesses have been listened to and is superb news for property investment companies. The relief is only available to companies that are within Corporation Tax so private investors will not benefit from this change. Expenditure must also be on ‘background’ assets. That is, expenditure which is expected to be installed in or on the site of a building which contribute to its functionality, and this definition covers a wide range of assets”

She goes on: “The impact of this change represents a major short-term boost for the sector as it will encourage landlords and help fund the investment needed to help businesses recover in the post pandemic world.

“The sector has been hit hard over the last year and many companies need funds to help finance works on properties that are vacant or require upgrading to ensure that they are properly equipped for the post-pandemic economy.”

Now she advises landlords to review their expenditure plans and forecast carefully.  

She adds this is an opportunity for companies contemplating expenditure in the short term to bring forward the timing of projects in order to benefit from these rules particularly, if they are to invest in assets which will qualify for the enhanced deduction.

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