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Spring 2021 49 N early a month has passed since the UK Budget and the hire sector and wider construction industry are still no wiser about how existing stocks of red diesel are to be managed, what level of record keeping is required, how equipment used in both construction and agriculture will be treated and if there will be a package of incentives and allowances available to hire businesses and suppliers. What is clear is that several of the UK Budget announcements, most notably the super-deduction and enhanced capital allowances, are not for use by those purchasing for the purpose of leasing (see below). This is despite HAE EHA being directed to these measures, by officials, as examples of potential government support. While HM Treasury has the lead on taxation matters (and this is about removing the red diesel duty rebate); the Department for Business, Energy and Industrial Strategy (BEIS), Her Majesty’s Revenue and Customs (HMRC) and the Department for Environment, Food and Rural Affairs (DEFRA) all have parts to play. HAE EHA has been encouraging the Treasury and BEIS to work together in shaping a comprehensive package of support for our sector. HMRC is responsible for duty enforcement and guidance to distributors of oils and DEFRA for emissions policy. HAE EHA took part in some early stage scoping of a new BEIS funding programme specifically for businesses making the transition from diesel - in recognition that schemes are in place for vehicles, aerospace and energy - but construction is overlooked. However, any programme has yet to be announced and details are not forthcoming. With the duty rebate being scrapped for construction from April 2022 this is urgent. HAE EHA is working with the Construction Plant-hire Association (CPA) and other federations and manufacturers to make the case for clarification and a package of support to encourage transition from older diesel equipment and, where alternatives are available, from diesel altogether. In the meantime, an email from Treasury officials makes clear (particularly if you are a tax expert) that the hire sector cannot benefit (with some exceptions) from several of the UK Budget measures which were specifically announced as backing the green economy. Here’s a summary of those key points: • The general exclusions contained within Section 46(2) CAA 2001 apply to the super-deduction and Special Rate (SR) allowance • Expenditure on the provision of plant and machinery for leasing is excluded from the scope of the super-deduction and SR allowance by virtue of general exclusion 6 • The carve-outs previously contained within Section 46(5)-(6) for background plant and machinery for the purposes of the first-year allowances for energy-saving plant and machinery and environmentally beneficial plant and machinery have not been re-enacted for the purposes of the super-deduction and SR allowance. Background plant and machinery for leasing is excluded from the scope of the super-deduction and SR allowance • The intention of these allowances is to provide an incentive for businesses to purchase new plant and machinery and bring those assets into long term productive use in their business and the economy. Plant and machinery for leasing are excluded because the company entitled to the allowances is not the company who brings the assets into productive use. This does not prevent the lessor or lessee from claiming other allowances or deductions to which they are otherwise entitled • There is a distinction between plant and machinery for leasing which is excluded by general exclusion 6 and plant and machinery for the provision of a service which could qualify for the super-deduction. There is guidance available in HMRC’s Capital Allowances Manual. www.gov.uk/hmrc-internal- manuals/capital-allowances- manual/ca23115 • The super-deduction and SR allowance can be available to the lessee where the plant and machinery is acquired under a long-funding lease or hire- purchase contract. Professional advice should be taken with regard to the tax implications of business transactions and investments. HAE EHA will keep lobbying and intends to share whatever further guidance or advice is received. Mark Bradshaw, who is leading for HAE EHA on this topic, would welcome contact frommember representatives with tax and capital allowance expertise who might be able to support the Association in this campaign. << UK GOVERNMENTYET TO SHOW ITS HAND FOLLOWING RED DIESEL ANNOUNCEMENT NEWS www.hae.org.uk www.eha.org.uk