After a year of disruption, the Government has set out its plans to ‘build back better’. A big part of that is about rebuilding in a very literal sense, by investing in infrastructure and the construction industry.
In its policy paper published alongside the Spring Budget on 3 March 2021, the Government said it needs to “deliver infrastructure projects better, greener and faster”, and address “long-standing challenges” in the construction sector.
With a focus on growth that’s both efficient and sustainable, several measures were announced that could affect your firm. Here are some of the main changes to be aware of.
One of the headlines of the day was the introduction of the UK’s first national infrastructure bank, which will begin operating from its Leeds headquarters later this spring.
With an initial capitalisation of £12 billion and the ability to issue £10bn in guarantees, this will provide finance to private and public sector infrastructure projects.
In particular, it’s intended to further two main objectives: tackling climate change, and supporting regional and local economic growth.
Another notable Budget announcement was the location of eight new freeports in England.
Businesses inside these tax sites will benefit from a range of tax reliefs until September 2026. These include an enhanced 10% rate of structures and buildings allowance, an enhanced capital allowance of 100%, full relief from stamp duty land tax, and full business rates relief.
Plus, subject to parliamentary approval, employer National Insurance contributions relief will be available for eligible employees from April 2022 until at least April 2026.
When it came to corporation tax, the news wasn’t as positive for companies with higher profits – Chancellor Rishi Sunak announced he would be raising the main rate of corporation tax from 19% to 25% from April 2023.
This will not affect companies with lower profits, however, as a separate threshold is also being introduced for profits up to £50,000, which will be taxed at the current 19% rate. Profits between £50,000 and £250,000 will be subject to a tapered tax rate.
Construction businesses should also be able to benefit from the new ‘super-deduction’ – one of the few surprise measures announced in the Budget speech.
This will allow companies to benefit from a 130% first-year capital allowance on qualifying plant and machinery they invest in between 1 April 2021 and 31 March 2023.
The Government said this will cut companies’ tax bills by up to 25p for every £1 they invest.
To illustrate the measure’s impact, the Chancellor said:
“Under the existing rules, a construction firm buying £10 million of new equipment could reduce their taxable income, in the year they invest, by just £2.6m.
“With the super-deduction, they can now reduce it by £13m.”
A 50% first-year allowance will also be available for qualifying special-rate assets, including long-life ones.
Stamp duty extension
For those in the housing sector, the extension on the current SDLT holiday for property values under £500,000 until 30 June 2021 will have been welcome news. To save a ‘cliff-edge’ end to the scheme, the threshold will reduce to £250,000 until 30 September 2021, then to £125,000 after that.
Data from IHS Markit shows that while overall output in the UK construction industry increased in February 2021, that recovery was largely fuelled by commercial projects while house-building had stalled.
Brian Berry, chief executive of the Federation of Master Builders, argued the Chancellor “did not go far enough” to support that recovery, and that he should consider longer-term measures to tackle wider issues like supply chain disruption and raw material costs.
Finally, another important area for construction services firms is training.
The Government announced new measures to support traineeships and apprenticeships, including investment in new technologies and a ‘portable apprenticeships’ scheme that will allow people to work across different projects and for different employers.
The incentive for taking on apprentices will also increase to £3,000 between 1 April and 30 September 2021.
Steve Radley, policy director at the Construction Industry Training Board, commented:
“With the recovery from the crisis in sight, this welcome investment in infrastructure, traineeships and the new flexible apprenticeships … will help support thousands of people into the construction industry just as employers are looking to hire them.”
Talk to us about what Spring Budget 2021 means for you.