'Super-deduction' tax break 'grossly unfair' for professional services industry 

A tax specialist has deemed a super-deduction tax break ‘grossly unfair’ on law firms and other businesses typically structured as partnerships, as the tax break is only available to companies paying corporation tax. 

Chancellor, Rishi Sunak, announced earlier this week: "For the next two years, when companies invest, they can reduce their tax bill, not just by a proportion of the cost of that investment, as they do now, or even by 100 per cent of the cost.

"With the super deduction, they can now reduce their tax bill by 130 per cent of the cost."

The super-deduction tax break will apply from 1 April 2021 until 31 March 2023, during which time companies investing in qualifying new plant and machinery assets will benefit from a 130% first-year capital allowance. This means that a company investing £10m would be able to reduce its overall taxable profits by £13m. 

Sunak hailed the £25 billion tax cut as “the biggest business tax cut in modern British history”.

However, Alun Oliver, managing director of Hampshire-based property tax specialists, E3 Consulting, described it as “disappointing” that many businesses will not qualify for the relief, due to not being structured as companies paying corporation tax. 

Oliver said the exclusion of other types of business was “grossly unfair, given that much economic activity is through other corporate entities such as limited liability partnerships (LLPs), individuals or ‘old style’ partnerships.

“GP surgeries, engineering firms and professional services, including lawyers and architects, are all among those often structured as LLPs, as well as the UK farming sector – all of which will not benefit.” 

He added: “Furthermore, a great deal of property investment is carried out through LLPs. As it stands, the super-deduction represents a missed opportunity to encourage even greater investment.”

According to Companies House, there are more than 50,000 LLPs and more than 50,000 limited partnerships in the UK, and so many businesses are set to miss out.  

Oliver urged the Chancellor to “consider inclusion of those corporate entities which are set to miss out – that will undoubtedly reduce the impact of these investment measures.”