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Contractors want tax break for purchases they don’t make

1 Sep 21 Civil engineering contractors want the new tax break for machinery purchases extended to those that only hire their equipment.

The 2021 budget introduced a super deduction allowance for capital investment
The 2021 budget introduced a super deduction allowance for capital investment

The Civil Engineering Contractors Association has joined six other industry trade bodies in writing to chancellor of the exchequer Rishi Sunak asking him to widen the eligibility criteria for the super deduction allowance (SDA).

SDA was introduced by Rishi Sunak in his March 2021 budget. Until April 2023 purchasers can claim a 130% capital allowance against qualifying new plant purchases. The purpose is to both stimulate business investment after the shock of the pandemic and to incentivise those still running old polluting machinery to make the leap to cleaner kit.

The Civil Engineering Contractors Association, however, thinks that companies that choose to lease rather than purchase their machinery should not miss out on this special temporary tax allowance.

CECA director of external affairs Marie-Claude Hemming said: “Our members lease and hire plant as it is often the most efficient means of ensuring access to the latest machinery when and where it is needed, and hence is more efficient in project delivery. The super deduction allowance simply doesn’t reflect the practices of many civil engineering firms on the ground. In our industry, where plant and machinery is invariably highly specialised, around 70% of it is hired on a project-by-project basis.

“If the chancellor were to extend the super deduction allowance to include short-term hire and leasing, it would provide an added incentive to firms to use the newest plant and machinery, with obvious environmental benefits, as well as feeding through to efficiencies in project delivery.

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“The infrastructure sector is central to the UK government’s aim of ‘levelling-up’, and hence we call on the government to make this change, to ensure our industry can deliver the infrastructure businesses and communities rely upon with higher rates of efficiency, productivity, and fewer carbon emissions.”

The other trade bodies joining with CECA to lobby for their members to pay less tax are: Finance & Leasing Association; British Vehicle Rental & Leasing Association (BVRLA); Forum of Private Business; Logistics UK; the Manufacturing Technologies Association; and the Association of Chartered Certified Accountants (ACCA).

When Rishi Sunak initially announced the super deduction allowance, he gave the impression that it would be availble for all new machinery purchases. However, a few weeks later it emerged that only companies that actually themselves use the equipment they purchase are entitled to the SDA. Thus a plant hire company sending out a crane or excavator with an operator qualifies for the SDA. A fleet owner hiring out a machine without an operator does not qualify. This came as a surprise to the industry. There was, however, never any expectation that customers of equipment owners would be entitled to taxpayer subsidies as well.

See also: The lowdown on… super deductions

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