CPA Bulletin

16 CPA Bulletin > May 2021 www.cpa.uk.net When Rishi Sunak delivered his first Budget as Chancellor back in March 2020, little did he suspect that the package of support measures he outlined for businesses impacted by the oncoming COVID-19 pandemic was only the start. Having to combat the deepest recession in 300 years has seen the Office for Budget Responsibility (OBR) estimate borrowing would be £355bn for the current year (April 2020 - April 2021), before falling back to £234bn over the course of the following year. Over £100bn has been spent on supporting wages for those employees on furlough, alongside the various business support schemes. One year on, following the relative success of the vaccine rollout and the fall in COVID infections, this year’s Budget provided the Chancellor an opportunity to look ahead. Construction was singled out in his speech as a driver of growth and business investment - the question is - does this Budget make any difference? Super Deduction Allowance Amongst the key flagship policies announced by the Chancellor, the most striking was the introduction of a so called ‘Super Deduction Allowance’ (SDA). The allowance came into effect in April, it runs for two years and in theory, will cut companies’ tax bill by 25p for every pound they invest in new equipment meaning they can reduce their taxable profits by 130% of the cost. According to the Treasury, it will be worth £25bn to companies over the two-year period the SDA will be in full effect. However, reading through the small print contained within the main Budget documents, there is a clear misunderstanding around how modern construction companies hire and use plant. Quoting the Treasury’s own words: ‘The policy intention of these allowances is to provide an incentive for businesses to purchase new plant and machinery and bring those assets into long term productive use in business and the economy. Plant and machinery for leasing are excluded because the company entitled to the allowances is not the company who brings the assets into productive use. This does not prevent the lessor or lessee from claiming other allowances or deductions to which they are otherwise entitled.’ In short, if a member buys an item of plant/machinery with the intention of benefitting from the Super Deduction Scheme/Allowance (SDS/A), then it is on the understanding that an operator must predominately be provided with the plant/machine when it goes out on hire. Those items of plant/machinery which go out on hire on a self-drive basis, does not currently qualify for SDS/A. We are presently in talks with representatives from HM Treasury to try to remove this exemption for self-drive plant. Clearly this will impact on many of our members looking to take advantage of the scheme. If members need further clarity and guidance, we recommend that they seek further advice from their financial advisors or a tax advisory consultant. We are looking to work with stakeholders and other trade associations in showing the discrepancies and inconsistency in the Treasury’s approach and why the SDA needs to be expanded to help all plant-hire companies take advantage of it. Further details will be released in due course. Red Diesel The Treasury confirmed the ability to use rebated red diesel in construction will be removed in April 2022, with a consultation response setting out their reasons why. In a subsequent meeting with the CPA, the Treasury acknowledged this will add additional costs to the construction industry, but they believe the case for continued entitlement was not compelling enough to outweigh the government’s long-term environmental objectives and the need for the tax system to incentivise the development of greener alternatives to polluting fuels. The CPA will be working with members in the coming months to highlight this change and what actions they should consider in reducing red diesel stocks, ahead of the April 2022 deadline. We are keen to ensure that members with trace elements of red diesel in their fuel tanks are not unfairly punished by the authorities once the April deadline has passed. Annual Investment Allowance (AIA) The Chancellor confirmed his plan to increase the limit on the AIA from £200,000 to £1,000,000 on expenditure on plant and machinery and extended its term to run to the end of December 2021. This was originally announced in the Autumn statement last year. Set alongside the SDA, the increase and extension is designed to boost capital expenditure and boost investment. Incentives for hiring apprentices An incentive payment for hiring new apprentices has been increased to £3,000 and extended to September this year. This is to boost investment in skills and training. There will also be a more flexible way of employing apprentices, alongside additional funding for SMEs to develop their digital and management capabilities via a ‘Help to Grow’ training programme. This will include a 50% discount worth up to £5,000 on types of digital software. POLICY: 1 POLICY A Budget for Construction in the post-COVID age?