McDermott Comment | Mini-Budget - McDermott Will & Emery

McDermott Comment | Mini-Budget

Overview


Sarah Gabbai, tax lawyer at international law firm McDermott Will & Emery, said:

“Reductions in headline rates will always be optically and politically attractive. While the proposed cancellation of the planned corporation tax rate increase from 19% to 25% may be welcome news for most non-capital intensive businesses, it may also come as a disappointment for capital-intensive businesses with significant plant pools, since many of them will have been disclaiming capital allowances ahead of the planned rate increase, after which such reliefs would have become more valuable. That said, such disappointment ought to be mitigated to a large extent if those businesses are able to take advantage of the enhanced 130% super-deduction for new acquisitions of plant and machinery between 1 April 2021 and 31 March 2023- a measure which was intended to accelerate capital spend ahead of the planned rate increase. I wouldn’t be surprised if we see a raft of super-deduction claims and maxing out on capital allowances more generally ahead of April next year.

While one would intuitively expect markets to react favourably to news of tax cuts, the reversal of the CT rate increase and the additional 1.25% NICs levy, as well as the wider tax cutting measures, have in fact come at a time when public borrowing costs have increased at the same time, resulting in market nervousness around increased national debt and a sharp drop in the value of sterling.”

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