Rishi Sunak’s first budget today contained a few announcements that will directly affect taxation in the project finance sector, with the major ones being the reversal of the reduction in the corporation tax rate and the enhancements to the Structures and Buildings Allowance (SBA) regime.
Corporation Tax Rates
The cut in the rate of corporation tax from 19% to 17% was reversed as expected and will stay at this 19% rate for at least two years.
Structures and Buildings Allowance
There was good news for the fairly new SBA regime, launched at the end of 2018. Companies that incur qualifying expenditure on the construction, renovation or conversion of non-residential structures and buildings are eligible for this relief.
From 1 April 2020 companies may claim an increased annual allowance of 3% (up from 2%). At present it takes 50 years to obtain full relief for qualifying expenditure, and this will reduce to 33.3 years with the new measure. Companies already claiming at 2% can switch to 3% from 1 April 2020.
Other measures that will affect some companies in the project finance sector include:
Enhanced Capital Allowances in Enterprise Zones
These 100% first-year capital allowances are now available until at least 31 March 2021 for expenditure on plant and machinery in all areas designated Enterprise Zones.
Capital Loss Restriction.
As has been widely signposted, from 1 April 2020 restrictions will be brought in for capital losses, to bring them into line with trading losses. The proportion of chargeable gains that may be relieved by capital losses brought forward will be limited to 50% for gains in excess of £5m. The first £5m of gains will remain fully eligible for offset, although this £5m allowance is shared with the corporate income loss restriction regime, so for companies that have used some or all of the £5m in that calculation there will be less or none to use against gains.
Intangible Fixed Assets
From 1 July 2020, tax relief will now be available on pre-FA 2002 intangible fixed assets acquired from related parties, which could be valuable for some companies.
