Income Tax — House of Commons, 2019-07-03
Topic: Macroeconomics
Alexander Jesse Norman (Conservative, Centre-right): I beg to move, That the draft Capital Allowances (Structures and Buildings Allowances) Regulations 2019, which were laid before this House on 17 June, be approved The instrument before the House gives effect to the amendments to several tax Acts, principal among them the Capital Allowances Act 2001. The Government are determined to ensure that the UK tax system supports business investment and jobs. At 19%, the UK has already reduced its corporation tax rate to the lowest in the G20, and it is scheduled to fall still further to 17% in 2020. The Government recognise the importance of providing tax reliefs for genuine business costs, which is why we are taking steps to increase the overall competitiveness of the capital allowances regime At the autumn Budget, we announced an increase in the annual investment allowance for plant and machinery to £1 million per annum for two years, meaning that businesses will be able to deduct five times more qualifying plant and machinery expenditure in the year in which they make the investment. However, the UK is currently the only G7 economy that offers no capital allowances on investments in structures and buildings. That means there are no allowances on critical investments in bridges, roads or tunnels. It also means no allowances on investments in shops, offices or factories In the 2018 Budget, the Government set out to rectify the gap in the capital allowances regime by providing relief to businesses on qualifying expenditure on new non-residential structures and buildings. The Finance Act 2019 gave power to that effect, and I am now pleased to introduce the draft statutory instrument necessary to enact the change. It was important to follow the legislative process to provide taxpayers with certainty that the allowance will come into force as soon as possible, to minimise the risk of deferred investment and to allow the Government to consult extensively on this important measure, as we have done At the Budget, the Government published a detailed technical note for consultation that outlined the key features of the new allowance. Businesses that invest in new builds or renovations on or after 29 October 2018 will be able to claim tax relief at 2% a year on eligible costs, over a 50-year period. Following the first round of consultation, officials met scores of different companies, representative bodies and individuals from throughout the country. At the spring statement 2019, the Government published detailed draft legislation and invited further comments from stakeholders I am pleased to report that the vast majority of stakeholders welcomed the structures and buildings allowance. I extend my thanks to the many individuals and organisations that participated in both rounds of consultation, either in person or through written representations. Stakeholder responses have been a considerable help in the shaping of the new allowance, leading to amendments, including those relating to short-term leaseholds, eligible pre-trading costs and periods of disuse As I have said, the structures and buildings allowance has been designed to enable businesses to claim tax relief on the costs of new non-residential structures and buildings. This means that qualifying expenditure on new builds or renovations for which all the contracts for the physical construction works were entered into on or after 29 October 2018 will be eligible for relief. Relief will be available for any business that fulfils two conditions: first, that it owns a qualifying asset, either through direct building or by acquiring one from a developer; and secondly, that it uses the building for a qualifying activity for which the business is chargeable for UK tax Qualifying persons will be able to claim tax relief at 2% a year on eligible construction costs, including renovations. The allowance will apply across all sectors and sizes of UK trade, benefiting business owners, workers and the wider economy. The relief will be limited to the costs of the physical construction of the structure or building, and will not apply to the costs of acquiring the underlying land, rights over land, or planning permissions In summary, the regulations will enact important improvements to our capital allowances regime, in line with the power this House approved in the Finance Act 2019. Since 29 October 2018, business investments in new, and renovations of old, structures and buildings have been accompanied by an expectation of this allowance of 2% relief per annum against income or corporation tax bills. It is now important for the House to honour the commitment made in Finance Act 2019 by enacting the regulations, thereby bringing them into force in line with their commencement provisions. I therefore commend the regulations to the House.