Hirers need more help, HAE tells Treasury
20 February 2023
Hire Association Europe and the Event Hire Association (HAE EHA) has urged the Treasury to recognise challenges facing the industry and is focusing on the issue of capital allowances as businesses move towards net zero. It believes this would deliver the greatest benefits.
In a submission in advance of the Spring Budget on 15 March, HAE points out that the removal of the red diesel rebate for construction from April 2022 prompted an urgent need to innovate and invest in new technology, where available and affordable.
However, it adds that most hire businesses have not been able to benefit from the Super Deduction Allowance (SDA), whereby companies investing in qualifying new plant and machinery assets can benefit from a 130 per cent first-year capital allowance. This enables companies to cut their tax bill by up to 25p for every £1 they invest.
Most hire businesses cannot utilise the SDA because, states HAE, there is a fundamental mismatch between the way the UK construction sector procures equipment. Very few companies now own their fleets, finding that hire is more cost-effective and flexible. It has been estimated that approximately 75 per cent of construction equipment in the UK is hired in.
The Super Deduction Allowance – which is due to expire at the end of March 2023 - is currently only available to companies who both own and operate the plant.
HAE says HM Treasury has confirmed this, stating: “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’.
The association says that such a policy may have been appropriate in the 1980s to prevent leasing companies benefiting from the extra allowance, but works against the construction hire sector.
In its submission, HAE states: “With the time-limited nature of the SDA, there is now an opportunity to address this issue and adjust the current capital allowances regime, which would help hire businesses and others to afford the large cost gap between conventional diesel powered equipment and newer technologies. This would be beneficial to the manufacturing sector and help accelerate progress towards cleaner air and net zero.”
It adds: “In reality, most hire businesses plan on the basis of a six to eight-year investment cycle for their capital spending. Therefore, the economic situation and consequent capital decision in one year will have implications for up to eight years ahead. In the context of net zero, hire equipment bought in 2023 will still be operational in 2030.”
HAE hopes to discuss the SDA issue with officials and to share information from its members.
Photo: Daniel Frese
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