IoD press release calls for investment tax super-deduction to be made permanent, citing “positive and measurable” impact on business investment
The Institute of Directors has today released polling data from its members showing that the temporary capital investment tax ‘super-deduction’ has had a positive and measurable impact. The super-deduction was introduced in Budget 2021 for two years to increase levels of business investment as the economy recovered from the pandemic.
Of those firms whose business depends in some way on fixed capital, 13% reported that the super-deduction had had a direct impact on the level of investment undertaken in the years 2021-23 and for half of these it was entirely new investment as a direct result of the super-deduction rather than a bringing forward of previous plans.
As a result, and in response to the government’s consultation on potential reforms to the capital allowances regime, the Institute of Directors is calling for this 130% super-deduction to be made permanent.
Kitty Ussher, chief economist of the Institute of Directors, said:
“The Chancellor has already said he is considering using the tax system to incentivise greater business investment. Our data shows the positive impact the super-deduction has already had in doing just that. We are therefore calling for the Chancellor to make it a permanent feature of doing business in Britain.
“It is wrong to look at declining overall levels of business investment in recent months and conclude that the super-deduction has not worked. Instead, our data shows that even less investment would have taken place if the super-deduction did not exist.
“When business confidence in the macroeconomy is low, as it is at the moment, the case for government incentives to raise investment becomes even stronger.”
The deadline for responding to the Treasury’s invitation to submit views on potential reforms to the UK’s capital allowances regime is Friday 1st July. The IoD’s full response to the consultation is available here.
During Treasury Questions in the House of Commons on 28th June 2022, Chancellor Rishi Sunak stated there were plans for “…tax cuts in the autumn to drive growth in business investment and innovation…”.
On 30th June 2022, Office of National Statistics data showed a 0.6% fall in business investment in the first quarter of 2022. IoD data also shows a decline in investment intentions since June 2021, linked to a fall in the business leader confidence in prospects for the UK economy, over the same period.
In February 2022, the IoD asked a survey question of its members around the impact of the super-deduction on their investment intentions. The results were then adjusted to take account of the fact that 46% of IoD members state that their business does not depend on fixed capital.