The government’s super withholding tax relief to encourage business investment was endorsed by the UK’s Big 4 accountants in a report released today by the Infrastructure Forum. (8/31/21).
Deloitte, EY, KPMG and PwC say the easements introduced in this year’s budget are already helping companies convert and invest. The Infrastructure Forum, which brings together investors, developers and operators of UK infrastructure, supports the call to make super deductions a permanent part of the UK tax system.
The report warns, however, that the non-appearance of HMRC guidelines slows down the use of the discharge and that “detailed guidelines should be produced urgently”.
It states that the discharge should be extended “to almost five years” and that “in particular incentives for investments in carbon-reducing technologies and infrastructure” should be created.
The report claims the short tax break time frame – which allows companies to claim 130% capital deductions on qualified machinery and equipment investments for expenses incurred by 1st infrastructure projects.
Large infrastructure projects have long lead times and often take between 5 and 10 years to plan. The short window of two years means project managers are unable to accelerate significant investments. Accordingly, the report states that the super deduction should be extended to at least five years.
Matt Smith, Deloitte’s Tax Partner, said, “We anticipate that super-deductions will need to be used extensively by corporations as leverage to manage their tax burden and possibly mitigate corporate tax increases to 25% in 2023 practical issues in the detailed legislation combined with a lack of certainty stemming from the fact that HM Revenue & Customs has not yet published detailed guidelines on super deductions ”.
Graham Wright, EY Tax Partner, said: “The UK has for many years lagged other jurisdictions in the generosity of its ‘tax depreciation’ system and favoring low corporate tax rates. With tax rates rising, it is time to think about some more permanent changes ”.
Harinder Soor, tax partner at KPMG, said: “The introduction of the super deduction was by far the standout feature of this year’s budget – it is now law and the infrastructure sector will have to adopt it for the next few years. The challenges identified must not dilute the value at stake and, although the concept of the scheme is not perfect, the sector should benefit significantly from the measure. “
Elisabeth Hunt, Partner, Tax, Energy, Utilities & Infrastructure at PwC, said: “The announcement of the super deduction was welcomed as an attractive regime and is significantly more generous than the corresponding measures under the GFC. The facilities available have encouraged many of our clients to accelerate their investment plans; invest now for future growth and productivity gains. Going forward, we need to think about how we can build on this platform to develop a more permanent regime that can maintain the level of investment needed to meet the challenges of the energy transition. “
Click here to read the full Infrastructure Forum report: Super-Charging the Super-Deduction.