Jeremy Hunt’s budget on Wednesday 15th March contained some announcements that may directly affect the project finance sector, with the major one being allowing expensing of qualifying capital expenditure that would usually be qualifying additions to the main and special rate pools.
The Super Deduction which enables companies to claim a 130% deduction on new qualifying main rate pool plant and machinery will end on 31 March 2023. From 1 April 2023, companies will be able to fully expense 100% of new qualifying main rate pool plant and machinery expenditure until 31 March 2026.
In addition, companies can continue to claim a 50% first year allowance on qualifying special rate (including long life assets) pool capital expenditure incurred between 1 April 2023 and 31 March 2026. 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.
Other measures that might affect some companies in the project finance sector include:
Electricity Generator Levy (EGL)
The benchmark price which was set at £75 per megawatt hour when the EGL was announced at Autumn Statement 2022 will be indexed in line with prior year CPI inflation from 1 April 2024. In addition, from 1 January 2023, exceptional generation fuel costs can be deducted from the measure of excess revenues when calculating the EGL liability payable.
Carbon Capture Usage and Storage (CCUS)
£20 billion will be invested in support early development of CCUS over 20 years to back projects which will aim to store 20 to 30 million tonnes of CO2 a year by 2030.
Landfill tax rates
From 1 April 2023, the standard landfill tax rate increases to £102.10 per tonne with the lower rate increasing to £3.25 per tonne.