A working group on Taxation set up by TIF has claimed that, “in recent years the direction of UK tax policy has been to discourage capital investment in buildings and structures.”
According to a paper published by TIF, titled ‘Taxation Autumn Statement Paper: “What should the Government be doing on tax to support investment in new infrastructure”, under the current tax law some infrastructure investors will suffer effective tax rates in excess of 40 per cent as compared to the statutory rate of 22 per cent from 2014.
The paper points out that such disincentives will inevitably cause some projects to “become delayed or even abandoned as unaffordable as a consequence”. The paper contains extracts from representations made earlier in the year as part of an informal consultation to HM Treasury. These highlight how Forum participants have already witnessed an impact on investment decisions under the current framework.
The Group says that the UK is the only G20 nation not to offer any tax relief for capital investment in buildings and structures. The paper argues that “the Government does not appear, as yet, to have grasped” the full negative impact that the current tax regime is having on UK infrastructure.
The Group has been consulting informally with HM Treasury on the re-introduction of tax relief for investment in buildings and structures which are a major part of national economic infrastructure and is also ready to work with HM Treasury to assess the potential for Infra REITs and other structures to bring investment into new Greenfield infrastructure from a broader range of investors.
The Taxation working group is chaired by Margaret Stephens of KPMG. Ms Stephens commented: “Investment in infrastructure is a national imperative for the UK and the Government must do all it can to support it. However, the current tax system actually disincentives capital investment. This impacts investment in new power stations, waste plants, roads, rail and other capital projects.
The Infrastructure Forum Advisory Council Chairman Richard Threlfall said: “Infrastructure will again be top of the agenda in this year’s Autumn Statement as the Government continues to grapple with how to drive economic growth. Clearly, the infrastructure industry is calling out for a review of the current tax system which is fast becoming a road block to growth and investment. We are on the cusp of ramping up UK’s infrastructure but investors and business across the sectors need a see the Government taking the right steps to create a fiscal environment which promotes and supports infrastructure through the right tax policies.”