In his statement to the House of Commons, the Chancellor Jeremy Hunt announced the following measures which will have a direct impact on the UK property and construction sectors, most of which confirmed announcements from last year, with one major surprise:
Full Expensing!
With the Corporation Tax Rate being increased from 19% to 25% from 1st April 2023 and the demise of the Super Deductions, the Chancellor has picked up on an idea mooted in last year's consultation on capital allowances reforms.
The changes, however, look at first sight to be very similar to the disappearing Super Deduction and Special Rate Allowance and are essentially the same with a different name:
- 100% first year allowance for Main Rate Pool plant & machinery (this is the full expensing part!)
- 50% first year allowance for Special Rate Pool plant & machinery (retained)
- will apply to Corporation Tax payers only (retained)
- not available on plant & machinery for leasing (retained)
Importantly to property investors/landlords is the fact that the leasing restriction will not apply to "background" plant & machinery leased with a building. A late drafting change to remove this restriction was made when Super Deductions were introduced and it is welcomed that a similar relaxation will again be employed in the Finance Bill.
This new regime is currently expected to be implemented for three years from 1st April 2023 with the hope that it can become permanent.
Annual Investment Allowance
The current £1m Annual Investment Allowance for plant & machinery has now been made ‘permanent’ and will continue to provide those investing in qualifying plant and machinery with tax relief on the first £1m of qualifying expenditure in each year, equivalent to a £250,000 tax saving.
This means that non-Corporation Tax payers will at least be entitled to full relief on the first £1m of plant and machinery expenditure in each year. It will also allow Corporation Tax payers, already basking in the sunshine of full expensing, to obtain 100% year 1 savings on the first £1m of Special Rate Pool Plant and Machinery, plus 50% on the balance.
Electric Vehicle Charging Points
Full first year tax relief on EV charging points is currently available but was due to cease on 31st March 2023. This has now been extended for a further two years to 31st March 2025, but unfortunately it is not available to property investors. The opportunity was still not taken to expand the first year allowance regime to cover a wider range of sustainability initiatives.
Landfill Tax
A common sight at this time of year is the increase in the Landfill Tax rates which, from 1st April 2023, will be:
Standard Rate : £102.10/tonne
Lower Rate : £3.25/tonne
The Government will also continue to engage with stakeholders on potential changes to the existing regime to help support their objective of zero avoidable waste by 2050. One possible change may be to move more materials to the Standard Rate and make changes to exemptions.
Aggregates Levy
The current rate of £2/tonne is being held for 2023/24, at which point it is due to increase to £2.03/tonne.
Investment Zones
The launch of 12 refocussed Investment Zones was announced to assist levelling up and boost productivity and growth with eight areas of England currently invited to submit bids. Further applications are expected from areas in Northern Ireland, Wales and Scotland. These Investment Zones will be able to access funding of up to £80m over five years which can be offered to companies in the form of:
- SDLT relief
- Business Rates Relief
- Enhanced Capital Allowances
- Enhanced Structures and Buildings Allowances
- Employer NI Contribution Relief
We shall await the winners!
VAT Threshold
There was the expected freeze on the VAT registration threshold (£85,000) which is being kept and now continues until 31st March 2026 bringing more small businesses into the clutches of VAT.
