UK associations call for increased full expensing allowance

The Parliamentary Estate. Photo: Adobe Stock

A group of UK-based associations have penned a letter to the Chancellor of the Exchequer calling on the Government to increase the full expensing allowance for short-term rented plant in the construction sector.

Under current rules, plant rented with an operator qualifies for full expensing relief as it is considered a service. However, plant rented without an operator does not qualify due to restrictions on assets deemed as ‘leased’. 

A joint letter from the Construction Equipment Association (CEA), Construction Plant Hire Association (CPA), and Hire Association Europe (HAE) to Chancellor Rachel Reeves argues that increasing the the full expensing allowance for short-term rented plant in the construction sector brings a net benefit of £26 million to the Exchequer and would boost the capacity of the National Infrastructure Pipeline and housebuilding initiatives.

A section of the letter reads, “The UK has £7.35 billion worth of construction plant sales per annum. The plant-hire sector is worth £53 billion to the UK economy with I.R.O 50,000 new pieces of construction plant purchased every year, therefore, 68% of plant retails in the UK are to rental companies.

“If a machine is rented with someone to operate it, it is currently eligible for full expensing relief as it provides a service, but if someone else consumes the benefits of that asset (i.e.: it is rented without an operator), it is not eligible due to the restriction on assets for `leasing`. Changing this would address a clear anomaly whilst simplifying the tax system for the industry.”

The associations said that changes would bring “targeted benefit” that would encourage investment in new plant and machinery. They also said that investment in new equipment would enhance productivity and capacity across the industry.

The letter also highlights a poll carried out by the CPA on its members, which found that 86% would be more inclined to invest in plant if full expensing allowance was available. Meanwhile, the HAE said that its members believed an extension of full expensing would “unlock significant new investment, significantly in cleaner, greener machines with reduced emissions and a lower carbon footprint.”

Concluding the letter, the associations said that by not incentivising the 86% of rental companies that would invest in newer machines, the risk is that “rental fleets would be run longer and become older therefore not adopting the latest and greenest technology, impacting on the Government`s ambitious carbon and emission reduction goals for the construction sector.”