Jeremy Hunt’s Autumn Statement on Wednesday 22nd November contained some announcements that will directly affect taxation in the project finance sector, with the major ones being the permanent extension of both the immediate expensing of qualifying plant and machinery expenditure and 50% first-year allowance on qualifying special rate (including long-life) assets.

 

Overall, these changes are likely to be beneficial to the sector and we can help you assess the impact of the measures on your transaction and group.

 

Capital Allowances

It had previously been announced that Companies will be able to claim 100% first-year relief on new qualifying main rate pool plant and machinery expenditure incurred from 1 April 2023 until 31 March 2026.  This has now been made permanent.

 

The 50% first year allowance that can be claimed on qualifying special rate (including long life assets) pool capital expenditure incurred between 1 April 2023 and 31 March 2026 has also been made permanent.  The remaining 50% of the qualifying expenditure will be added to the special rate pool and be allowable at a rate of 6% per annum on a reducing balance basis in future years.

 

Corporation Tax Rates

There were no changes to the rate of corporation tax.

Other measures that might affect some companies in the project finance sector include:

 

Electricity Generator Levy (EGL)

Receipts from electricity generation from new generating stations or additional capacity will be exempted from the EGL, where the substantive decision to proceed with the project is taken on or after 22 November 2023.

 

Climate Change Levy (CCL)

The main and reduced CCL rates have been frozen in 2025-26.

 

Landfill tax rates

From 1 April 2024, the standard landfill tax rate increases to £103.70 per tonne with the lower rate increasing to £3.30 per tonne.

 

Investment Zones

Three new Investment Zones will be introduced in Greater Manchester, West Midlands and East Midlands and provided with £160 million over 10 years.

Investment Zones benefit from tax incentives, planning liberalisation, and wider support for the local economy.  The time-limit for benefitting from the tax incentives will be extended from 5 years to 10 years.  The tax incentives include:

 

Business rates – 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in English Investment Zone tax sites.

 

Enhanced Structures and Buildings Allowance – accelerated relief to allow businesses to reduce their taxable profits by 10% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over five years.

 

Employer National Insurance contributions relief – zero-rate Employer NICs on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £25,000 per year, with Employer NICs being charged at the usual rate above this level.

 

Stamp Duty Land Tax (SDLT) – full SDLT relief for land and buildings bought for use or development for commercial purposes, and for purchases of land or buildings for new residential development.

 

Business Rates: Freeze in Small Business Multiplier

From 1 April 2024, the small business multiplier will be frozen at 49.9p for 12 months.

 

R&D Reliefs

The existing Research and Development Expenditure Credit (RDEC) and the Small and Medium Enterprise (SME) intensives schemes will be merged, with expenditure incurred in accounting periods beginning on or after 1 April 2024 being claimed in the merged scheme.  The notional tax rate applied to loss making entities in the merged scheme will be lowered from 25% to 19%.

 

In addition, under the new RDEC scheme, where a company contracts out the R&D, they will be able to claim the R&D relief.  If the contractor undertakes additional qualifying R&D not initiated by the company, the contractor can claim relief if the R&D qualifies.

 

Whilst these two schemes will merge, a new SME intensive scheme will be introduced.  Under this scheme, the ‘intensity threshold’ will be reduced from 40% to 30% meaning that only 30% of the total expenditure needs to relate to R&D to qualify for the scheme.  In addition, there will be a one year grace period, so that companies that go below the 30% qualifying R&D expenditure threshold continue to qualify for relief for one year.

 

For more information on this topic, please contact: dadams@operis.com

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