Three major trade associations in the construction sector are advocating for extending the full expensing allowance to short-term rented machinery.
- The Construction Equipment Association, Construction Plant Hire Association, and Hire Association Europe have united in their appeal to the government.
- Introduced in 2021, the allowance was initially for two years, benefiting only end-users of new machinery.
- The associations argue that extending the allowance to hire equipment will aid the National Infrastructure Pipeline and housing goals.
- This extension could promote investment in environmentally friendly machines and stimulate the UK manufacturing sector.
In a concerted effort, the Construction Equipment Association (CEA), the Construction Plant Hire Association (CPA), and Hire Association Europe (HAE) have submitted a letter to Rachel Reeves MP, the chancellor of the exchequer. The letter urges the extension of the full expensing allowance to companies renting short-term construction machinery, a move anticipated to significantly affect the construction sector.
The full expensing allowance, initially introduced by then-Chancellor Rishi Sunak in April 2021, allowed companies investing in new plant and machinery to deduct 130% of the investment cost from their taxable profits. Initially a temporary measure lasting two years, aimed as a post-COVID economic stimulus, it was later made permanent in November 2023 by Chancellor Jeremy Hunt. Despite such developments, companies involved in hiring out unoperated plant have been excluded from the scheme, much to the chagrin of industry stakeholders.
The representative bodies argue that allowing rental firms to benefit from this tax incentive would not only correct an existing disparity within the taxation framework but also provide a much-needed boost to the capacity of the construction industry. This change could enhance the sector’s ability to meet the ambitious objectives set by the government, particularly regarding the National Infrastructure Pipeline and housing targets.
Moreover, incentivising the investment in new, greener machinery is seen as a pivotal shift towards reducing emissions, hence supporting the UK’s environmental ambitions. Given that a significant proportion, 43%, of construction machinery sold within the UK is domestically manufactured, the associations assert that this could create an economic ripple effect, resulting in a £26 million net benefit to the Treasury through increased sales.
Such legislative adjustments are seen not merely as fiscal revisions but as strategic enhancements to the industry’s operational fabric, poised to unlock new levels of efficiency, sustainability, and growth potential.
The call for extending the full expensing allowance reflects a crucial step towards aligning tax policies with industry growth and environmental goals.
