Structures and buildings allowances: rate of relief

Part of Finance Bill – in a Public Bill Committee am 2:00 pm ar 9 Mehefin 2020.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury 2:00, 9 Mehefin 2020

Clause 28 makes changes that increase the rate of relief provided by the structures and buildings allowance. It is interesting that this allowance was also singled out by the CBI when referring to the economic incentives for investment that the Government provided in the Budget. From 1 and 6 April, for those businesses chargeable to income tax and corporation tax respectively, the rate of SBA will increase from 2% to 3% per annum. Clause 29 and schedule 4 ensure that SBA operates as intended through six minor and miscellaneous amendments.

The Government remain committed to incentivising businesses to invest in capital assets that will drive and support future prosperity. By increasing the SBA rate from 2% to 3%, we are levelling up the international competitiveness of the UK’s capital allowance regime. With a corporation tax rate of 19%, this country already boasts the lowest headline rate in the G20. Increasing the SBA rate helps us to go further, thereby reinforcing the UK’s attractiveness as a place to invest and do business, and addressing concerns about competitiveness—indeed, more than addressing them—that have already been raised in this Committee.

The changes made by clause 28 provide for a substantial increase in the rate of SBA relief from 2% to 3% per annum. This will apply to all expenditures eligible for SBA, including those already incurred on or since the announcement of the relief on 29 October 2018. Firms relieving any qualifying expenditure incurred from that date can now claim 3% per annum from the 2020-21 tax year onwards. Thus, the clause will help businesses to upgrade their farms, premises and factories, improving their cash flows as the UK bounces back from the effects of covid-19, so this accelerated relief represents support for business in the present economic conditions.

Clause 29 and schedule 4 make six miscellaneous amendments to the existing SBA legislation. The first amendment prevents double relief where research and development capital allowances are available, which maintains a long-standing principle of the tax system; the second clarifies the rules for allowances on contributions to public bodies; and the third ensures that relief is available from the first day that a structure or building comes into use, as was always the intention of the SBA legislation.

The final three amendments all ensure that the legislation simplifies compliance for taxpayers, which has been a long-standing request for the tax system in general and for the SBA in particular. The fourth extends aggregation of expenditure to simplify allowance calculations for persons who are not within the charge to tax; the fifth apportions expenditure for which an allowance can be made and other expenditure on a just and reasonable basis; and the final amendment eases the administrative requirement for firms by explicitly including oral construction contracts within the allowance statement.

New clause 10, which was tabled by the Scottish National party, would require the Chancellor of the Exchequer to review the impacts of clause 29 and schedule 4’s miscellaneous amendments to the SBA legislation within six months of the passing of the Finance Act. Specifically, it would require the Chancellor to review the impacts on business investment, employment, productivity and energy efficiency in the constituent nations and English regions of the United Kingdom.

First, I assure Members that HMRC and the Treasury continue to monitor tax reliefs carefully, according to the level of risk posed. It is a fact about the construction of new buildings that often it can take many years to erect them, and SBA claims are ordinarily settled when businesses bring buildings into use and submit tax returns at year-end. Given that, it would be neither possible nor appropriate to attempt to draw conclusions on the productivity or the energy efficiency impacts of this change to legislation within such a short period of time. On that basis, I therefore urge the Committee to reject the new clause.

Increasing the SBA rate and making these technical amendments will ensure that the SBA functions as intended—as an important relief for businesses up and down the country that wish to invest. I therefore commend both these clauses and schedule 4 to the Committee.