ICAEW’s Tax Faculty has written to MPs highlighting that assets purchased with a view to leasing to third parties do not qualify for the new super-deduction or special rate first- year allowance for capital allowances purposes.
Following announcements in the Budget, two new first year allowances are available for expenditure on qualifying assets between 1 April 2021 and 31 March 2023.
- A 130% super-deduction capital allowance on qualifying plant and machinery investments.
- A 50% first-year allowance for qualifying special rate assets (the “special rate allowance”).
Assets acquired with a view to leasing to third parties are excluded from both these allowances.
The Tax Faculty has noted that leased assets make up a significant proportion of plant and machinery used in trading activities and that their exclusion would reduce the impact that these temporary allowances have on incentivising commercial investment and growth.
The Construction Plant Hire Association estimates that the UK’s plant hire industry is worth £4bn per annum. Meanwhile, the Construction Equipment Association estimates that 60%-65% of all construction equipment sold in the UK goes into plant hire.
Inclusion of leased assets would therefore be a significant incentive to construction companies and the companies that lease their equipment to them.
The faculty has therefore written to MPs (ICAEW Rep 35/21), calling on them to argue for leased assets to be included in the assets qualifying for these allowances when this year’s Finance Bill is debated at committee stage in the House of Commons.
Richard Jones of ICAEW’s Tax Faculty and Steve Watts, Capital Allowances Partner at BDO will be discussing these issues and more when they lead a webinar on 14 June on the shape of capital allowances following this year’s Finance Bill changes. Register to attend.
Webinar: Capital allowances
Steve Watts, Capital Allowances Partner at BDO joins the Tax Faculty's Richard Jones to discuss the capital allowances landscape following the 2021 Finance Bill, including the super-deduction.
More support on tax
ICAEW's Tax Faculty provides technical guidance and practical support on tax practice and policy. You can sign up to the Tax Faculty's free enewsletter (TAXwire) which provides weekly updates on developments in tax.
Sign up for TAXwireJoin the Tax FacultyTax Faculty
This guidance is created by the Tax Faculty, recognised internationally as a leading authority and source of expertise on taxation. The Faculty is the voice of tax for ICAEW, responsible for all submissions to the tax authorities. Join the Faculty for expert guidance and support enabling you to provide the best advice on tax to your clients or business.
