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Brexit and investment – is now the right time?

Brexit is now a certainty and the possibility of leaving without a deal ina few months time looks more and more likely. This article considers Brexit and investment – whether businesses should invest in new equipment or other long-term capital acquisitions in advance of Brexit.

Until 31 December 2020, most equipment purchases qualify for a tax break of up to £1m a year – as long as qulaifying purchases fit the criteria for the Annual Investment Allowance.

But in truth, no one knows what the impact of the Brexit will be.

Brexiteers believe that the floodgates will open and the rest of the world will rush to buy our goods and services, whereas Remainers expect recession to return immediately the EU drawbridge is lifted.

I suspect that reality will sit somewhere between these two extreme points of view.

With these uncertainties present, you may ask whether or not this a good time to consider investing in new plant and equipment or that new commercial building you have your eye on?

As always, a considered response to this question is……..

It depends.

Cars do not generally qualify but commercial vehicles and other plant and equipment will.

As the economic outlook is more unclear than usual, making purchases to take advantage of tax reliefs may not be the most prudent course of action.

And what about investment in equipment that will allow you to develop new income streams for your business?

More than likely, this would be a speculative investment, with higher expected returns, but significant risks. This type of investment may be best left until the immediate effects of Brexit can be ascertained and factored into your business development planning.

Finally, there are investments that will make your existing business more efficient and possibly more profitable such as updating your IT or replacing other worn-out business assets with up-to-date alternatives.

This final example would seem to be a much more plausible case for investment and one that could well position you nicely whatever the Brexit outcome may be.

Our advice would be that you carefully consider your options based on a combination of tax benefits, payback periods and returns on your investment.

A downturn in economic activity remains very possible and this is probably not the time to throw caution to the wind by making ill-considered investments.

Contact us today here at THP Chartered Accountants if you would like our help when making these judgements for your business. With offices in CheamChelmsfordWanstead, and Saffron Walden.

Avatar for Jon Pryse-Jones
About Jon Pryse-Jones

Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.

An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”

Jon’s appreciation for THP extends to his fellow team members and the board.  “They really know how to run a successful business,” he says.  He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.

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