Too few SME businesses are taking advantage of super allowances for the incentives to have any positive effect on the wider UK economy, according to Azets.
It revealed the introduction of super capital allowances during the Spring Budget 2021 act as an unexpected ‘boost’ to companies, but there is a risk of the schemes having little impact unless more businesses start using them.
The super allowances available include the super deduction, a 130% first-year allowance for expenditure on main pool qualifying assets such as machinery, furniture, fittings, computers etc., and the enhanced special rate, a 50% first-year allowance for assets including integral features in buildings such as electrical, water and heating systems.
According to the firm, these are in addition to the existing Annual Investment Allowance (AIA) which permits 100% relief for up to £1m of expenditure incurred each year on qualifying plant and machinery assets, until 31 March 2023.
The uptake rate of the super deduction scheme still remains unclear but “early evidence suggests super deduction claims are building more slowly than expected”.
Gurj Sandhu, national head of capital allowances, Azets, said: “Business investment accounts for a significant part of GDP and is crucial to boosting long-term growth and productivity – weak spending undermines the recovery and risks more underwhelming growth in living standards, despite Government efforts to incentivise spending.
“The lack of uptake of super allowances is likely due to uncertainty, with the ever-present threat of stricter Covid measures and the economy being thrown back into lockdown leaving business owners reluctant to spend too quickly, particularly with the ongoing spread of the Omicron variant.”