How Companies Can Be Smart about New UK Capital Allowances

With four new major capital allowances in effect, UK companies have a lot to be happy about—if they can prepare.

When the UK government enacted four major capital allowances measures earlier this year—to much fanfare and as an ostensible economic panacea for a post-Brexit, pandemic-stricken economy—it effectively brought us back to the mix of high corporate taxes and generous allowances of the 1990s.

Still, companies looking to take advantage shouldn’t default to a been-there-done-that mentality.

There’s an obvious catch this time around, which might be why corporate decision making hasn’t changed much in the past several months: these measures are temporary, with the two most consequential policy amendments—the super-deduction and first-year allowance (FYA)—slated to sunset by 2023. At that point, corporate tax rates will rise to 25 percent, and it’s debatable whether the government will feel enough pressure to extend the allowances, let alone make them permanent. With politics being what it is, we might even see a revised and reduced replacement.

Companies still might see an opportunity to strike while they can. If they do, here’s what they need to know—and how they can prepare.