For customers with a tax year ending on 31st March, the time to review capital equipment expenditure for the current financial year is now. This will include most sole traders and individuals trading within a partnership. There is, however, a need to act fast. There are two generous capital allowance schemes available under a hire purchase agreement. In order to qualify, any equipment concerned must be on site and available for use within the financial year in which the allowance is claimed.

For those businesses in the final quarter of their financial year, the two allowances referred to above enable the full capital allowance of a newly acquired asset to be offset against tax in this financial year. The added benefit is that, under a hire purchase agreement, payment for the equipment concerned can be spread over a number of future years. The two schemes are:


Annual Investment Allowance


A capital allowance equating to 100% of the cost price of a qualifying asset can be claimed against tax in the year of acquisition. This allowance has a cap of £1,000,000 for the calendar year 2022. It is available on new and used equipment and can be claimed against both income and corporation tax. This means that all business trading styles can benefit from the scheme.




A capital allowance equating to 130% of the cost price of a qualifying asset can be claimed against tax in the year of acquisition. You read it correctly! This scheme allows a business to claim a tax allowance on a sum that is 30% more than the actual cost of the asset. By any standard, this is one of the most generous tax allowances ever introduced.


Whilst there is no cap on the amount of expenditure allowed under this scheme during 2022, the allowance can only be claimed against corporation tax. This means it is not available to sole-traders and partnerships. Unlike the annual investment allowance, super-deduction is available for new equipment only. It is also worth pointing out that it cannot be claimed in cases where assets are purchased for onward hire.


Cars cannot be included for either allowance, but commercial vehicles, plant and machinery all qualify, subject to the conditions described above.


Many businesses have a financial year ending March 2022, and this can act as a powerful and immediate incentive to bring forward capital expenditure to reduce any current tax liability. To benefit from these allowances before the end of their financial year, a business needs to ensure that any qualifying equipment, acquired by way of a hire purchase agreement, is ordered and delivered during the current quarter.


A hire purchase agreement allows businesses to acquire the equipment they need now and get the full benefits of the generous capital allowances currently available, without the need for a large cash outlay. In other words, businesses can get the tax allowances in their current financial year but spread the cost of purchase over a number of future years. A further point to note is that the interest element on a hire purchase agreement can also be offset against tax as a business expense. This means that for companies expecting to see an increase in corporation tax from 19% to 25% from April 2023, the real cost of any hire purchase agreement signed this year will reduce from that date.


In conclusion, and providing stock is available, there are many businesses that have a strong financial incentive to bring forward the acquisition of capital equipment. This means they will be able to retain cash for investment elsewhere. Capital allowances claimed now, on equipment subject to hire purchase agreements, provide the perfect solution.


BNP Paribas Leasing Solutions is not authorised to provide tax advice. You should consult an accountant in order to understand the tax consequences of any investment decision.

Andy MilsomAndy Milsom, Head of Partner Training & Development at BNP Paribas Leasing Solutions

Andy is an experienced sales and finance professional with over 25 years’ experience in sales aid leasing. Andy is widely recognised as an expert in business finance and has in recent years focused his attention on developing partner sales teams develop an understanding of how businesses secure project financing. His training programme – Finance Unlocked – is a highly rated customisable course and is offered at no cost to partners.

If you’re interested in helping your sales team overcome finance-related hurdles during the selling cycle, please get in touch with Andy on 07966 114 243 or email here.

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Sales of construction equipment in Europe grew by 15% in 2017.

After a very strong first quarter growth slowed down in the second quarter, before taking off again in Q3 and Q4. Current levels of sales are on par with the levels seen in 2006 and 2008, but the industry is still 20% below the 2007 peak. The troubled markets in Southern Europe and Central and Eastern Europe showed growth at above average levels. As a result, the North-South disparity is gradually becoming less pronounced.

Read the the main findings of the CECE Annual Economic Report 2018 by clicking the link below.

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As 2016 comes to a close, it’s time to look ahead and ready your business for the market demands of 2017. We’ve identified five key construction industry trends set to shape the market next year. Advancements in technology and an increased focus on sustainability play a vital role here, pushing construction companies to consider different construction methods and technologies that are smarter and greener than ever before.

1. Smart buildings

As technology rapidly progresses and becomes more affordable, our buildings are becoming more intelligent. Innovations such as the Internet of Things (IoT), are being incorporated into modern building designs to automate certain functions such as energy and water consumption. This use of technology can improve sustainability, efficiency, safety, personalisation, interactivity, and comfort for those who use the facility.

2. Prefabricated buildings

Architects are experimenting with the prefabricated building technique and enjoying some surprising results. This simple, safe and cost effective form doesn’t trade aesthetics for function and its visually appealing designs are attracting private homeowners and the public sector alike.

With new technologies in the construction tool-kit, the modern-day prefabricated home can be built in 24 hours – and built well. This has even reached the attention of the British government as a possible solution to the UK’s housing crisis.

3. 3D printing and BIM modelling

Today’s architectural models are no longer outlined in 2D or made up of cardboard and glue. 3D computer designs that use Building Information Modelling (BIM) are the new standard. These drawings provide a truly visual experience that gives the whole picture from every angle.

As construction industry trends go, it’s becoming an increasingly popular method to view the architectural designs with the specific building systems in place. This way, builders can make sure that the electrical system doesn’t clash with the plumbing and the plumbing won’t clash with the steel work. When all potential problems have been addressed before the foundations have been poured, the jobsite will be easier to manage, field coordination will be simpler and construction can be done faster, safer, cheaper and to a higher standard.

4. Mobile technology for on-site construction management

A construction site that runs like a well-oiled machine will save developers time and money. To help foremen manage their site operations more effectively, mobile-operated, cloud-powered software systems and apps are now available to facilitate easier administration. All field coordination as well as individual people management processes such as timesheets, performance reports and task allocation can be assigned, reviewed, tracked and stored on the go. This means managers can get on with overseeing the critical requirements of the build, rather than getting bogged down in administrative staff management.

5. Going green

‘Green’ buildings use less energy and are thus cheaper to run. This, combined with growing concern for the environment, is driving the trend for more environmentally-friendly buildings. In response, new building regulations have come into effect to harness the power of renewable energy. Earlier this year, San Francisco adopted a law stating that any new buildings under 10 storeys must be built with solar panels. The British government aims to have 4 million solar-powered homes up and running by 2020. Renewable energies are gaining ground in the construction industry for good reason: between April and September this year, solar power generated more electricity than coal power.

Of course, these are just a couple of the construction industry trends already influencing the sector. Urban migration, labour shortages, safety and security are more factors that are set to influence the direction of the industry, and the equipment needs of construction companies.

Interested in knowing how BNP Paribas Leasing Solutions can help you to capitalise on new opportunities in the construction sector? Contact us today for an informal chat to see how our finance options can help you to secure a stronger future.

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By Tristan Watkins, CEO, BNP Paribas Leasing Solutions UK

The flagship policy from George Osborne’s final budget as Chancellor of the Exchequer was undoubtedly the National Living Wage (NLW), which, as of April 2016, is already in effect. Over-25s working in London now earn an hourly minimum of £9.15, outside of London the hourly minimum is now £7.20. What’s more, these wages will increase by £1 an hour every year until 2020.

So what does this mean for the construction industry?

Deconstructing the NLW

Construction isn’t a breadline industry anymore: demographically speaking, most workers qualify for the increase. Indeed, the 45-49 age range has the most manual construction workers of all. But the industry average across all regions is well in excess of the new minimums. By 2020, it’s entirely likely that most construction workers and companies will be completely unaffected by the National Living Wage.

Construction wage growth is actually double the national average due to sheer demand. Unions lobby for salary hikes on a regular basis: 400,000 construction workers are expected to receive a 2.5% pay rise this year, and a further 2.75% pay rise next year – considerably above the projected inflation of 0.3%.

For the most part, construction salaries are already in excess of the NLW, and the market’s pay rises are often influenced by non-governmental forces. If your business model is robust, you have very little to fear from the national pay rise.

Laying the foundations for success

If construction CEOs are going to worry about their margins, there are bigger fish to fry than the red herring of the NLW. There’s the recent vote to leave the EU, the news that the sector has fallen into recession for the first time in four years, the endemic skills shortages that are pushing up the cost of skilled labour, and other long-term problems that have plagued the sector for decades.  

Productivity, for example, has increased by only 7% over the last twenty years: significantly below manufacturing, services, and the rest of the economy. Wage growth positively influences this metric, but the industry should be actively investing in measurement to identify inefficiencies, as well as training and education to iron them out.

Financial management is also a big issue for the industry: a small firm that wants to expand either has to strain its cashflow or deplete its cash cushion. Outlay on equipment and machinery doesn’t help matters – especially when it needs to be replaced every few years, either due to obsolescence or breakdown. When this expenditure is mitigated by cost-effective monthly leasing agreements, finances immediately become more predictable and more manageable than if the company’s cranes and tunnelling machines were bought outright. The latest, most-up-to-date equipment offers considerable efficiency savings: they may be retailing at a higher price, but leasing models offer greater access to them for cost-conscious customers.

The NLW may well inconvenience some firms, but it is unlikely to pose much of threat to any statistically significant number of them. Construction firms can mitigate what little impact the law will have by focusing instead on improving productivity and smarter financial management.  

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Businesses claimed £79.7 billion in capital allowances for plant and machinery in 2013/14, the highest total since the recession and up by 19% on the £66.9 billion of capital allowances claimed the previous year.

However, BNP Paribas Leasing Solutions warns that the rate of investment in new equipment and machinery could start to slow as a key capital allowance is cut back from the end of December. BNP Paribas Leasing Solutions points out that business investment in new equipment and machinery has been supported in particular by the Annual Investment Allowance, which offers tax relief at 100% on qualifying expenditure in the year of purchase.

In 2013/14 businesses claimed a record £10.4 billion of tax relief for plant and machinery through the Annual Investment Allowance (AIA).  However, the AIA is set to be cut from £500,000 to £200,000 from the end of December.

BNP Paribas Leasing Solutions points out that the AIA has played a crucial role in encouraging businesses to make very significant capital investments.  While tax relief is available on capital investment over the AIA limit, the relief is spread over the whole life of the asset rather than being available immediately, making it less valuable to businesses seeking to reduce their short-term tax liability.

Previous reductions in the limit for the AIA have had a major impact on the amount of relief claimed and related investment.  BNP Paribas Leasing Solutions points out that after the AIA was cut by 75% from £100,000 to £25,000 for the 2012/13 tax year, the value of relief claimed through the AIA fell by £1.5 billion from £7.2billion to £5.7 billion (a fall of 21%).  The total amount claimed in capital allowances for plant and machinery also declined, falling by £3.7 billion from £70.6 billion to £66.9 billion (down 5%).

Comments Tristan Watkins, UK Country Manager of BNP Paribas Leasing Solutions:

The latest figures on the use of capital allowances show how crucial the Annual Investment Allowance in particular has been in helping businesses to prioritise investment at a time when the economy has been climbing out of the recession.

While British businesses have done extremely well on job creation, they have lagged slightly on productivity, which means they could risk falling behind overseas rivals.

Any business that needs to make a substantial investment in its machinery or technology to maintain its competitive edge and can benefit from the extra tax allowances currently available should act now, before the Annual Investment Allowance falls at the end of the year.”

Farming and construction industries to be amongst most affected by fall in Annual Investment Allowance

BNP Paribas Leasing Solutions adds that the farming and construction industries are likely to be most affected by the fall in the Annual Investment Allowance, due to their reliance on machinery and equipment to maintain productivity, as well as the relatively small average size of businesses in these sectors.

Farmers benefitted from a record over £1.1 billion of capital allowances in 2013/14 driven by the increase in the AIA that year.  The use of the AIA accounted for half of all capital allowances claimed by farming and agricultural businesses –the highest proportion for any sector

Construction businesses claimed £3.7 billion in capital allowances for investment in plant and machinery, the largest sum since the recession.  Tax relief claimed through the AIA accounted for £1.1 billion (30%) of the capital allowances used by construction businesses.

BNP Paribas Leasing Solutions points out that businesses wanting to take full advantage of the current tax benefits available for major capital investments and still keep cash flow healthy can choose Hire Purchase rather than outright purchase.  They will be able to claim their full nnual Investment Allowance for assets that   are in use on their premises by the end of December,  without having to have made all the payments associated with the acquisition by that date.

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The total turnover of the UK construction sector has jumped another 6% in the last year to £218 billion, * and is now up 20.7% on its £180 billion low during the depths of the recession in 2009-10, according to BNP Paribas Leasing Solutions. The surge in turnover has come from across the housebuilding, commercial property development, and infrastructure sectors.

BNP Paribas Leasing Solutions says that construction companies have dealt with the sudden strain on cash created by the sharp pick-up in orders by making more use of leasing to fund their expansion.

Construction companies increased the amount of finance raised through leasing by 19% in the last year to £1.68 billion *, up from £1.41 billion the previous year.  The capital equipment acquired has enabled them to take on an expanding pipeline of new building projects without straining their cashflow or depleting their cash cushion.

Tristan Watkins, UK country manager for BNP Paribas Leasing Solutions explains that companies that cannot properly finance the expansion needed to deal with a recovery in orders can find themselves vulnerable to sudden cashflow shocks. This is why many insolvency practitioners say that economic recovery can be almost as dangerous to some businesses as a recession.

The construction sector generated £74.6 billion in new build projects orders in 2014, up from £65.4 billion in 2009, illustrating the scale of the expansion in capacity needed.  BNP Paribas Leasing Solution adds that many construction companies had cut capital investment during the economic downturn and now need to replace obsolete equipment and machinery.**

BNP Paribas Leasing Solutions notes that residential construction companies have increased their use of leasing most sharply, up by 52% from £ 17.8 million to £ 27.1 million in the last year.  The turnover of residential construction companies has grown by 21% to £20.3 billion over the same period, from £16.8 billion.

Residential construction companies turnover is expected to increase further as a result of the housing shortage and Government support for first time buyers, such as through the ‘Help to Buy’ scheme and new ‘Help to Buy’ ISAs.

Commercial construction companies have also expanded their use of leasing, up by 47.3% from £261 million to £385 million of finance.

Plant and equipment hire companies, also heavy users of leasing, have increased their use of leasing by 13.4%, up to £513 million in 2014/15, from £456 million in 2013/14.  BNP Paribas Leasing Solutions says that this subsector is a bellwether of the need for more machinery in construction as companies hire equipment when they have multiple projects underway that cannot be resourced internally.

BNP Paribas Leasing Solutions highlights the increased volume of big projects underway nationwide, including; the Battersea Power Station redevelopment;  ‘The Scalpel’ skyscraper in the City;  and the Birmingham Arena Central project which will house HSBC’s new UK retail and business  banking headquarters.

Tristan Watkins, UK country manager for BNP Paribas Leasing Solutions says:

These figures show how important leasing is to the construction sector; it gives firms the flexibility to manage their cash flow during difficult periods, and to scale up their capacity quickly.”

“UK construction firms are now seeing high levels of demand, and need to be able to access the machinery they need to complete projects efficiently.  Leasing is helping them to deliver new homes, new commercial buildings and infrastructure, and ultimately create new jobs.”

Call for clarity on Annual Investment Allowance

BNP Paribas Leasing Solutions adds that many construction companies’ investment plans will be affected by uncertainty over the future size of the Annual Investment Allowance (AIA) tax relief.  This temporarily stands at £500,000, dependent on the equipment bought being on site and ready for use by 31 December.

However, in the March Budget, the Chancellor said that the new AIA limit will not be determined until the Autumn.  This means that any company planning to purchase large or complex equipment will need to place an order now, or risk missing out on tax relief if the new AIA limit is set much lower.

Tristan Watkins adds: 

The construction industry will play a vital part in providing the new housing that all the major parties agree is desperately needed.  For construction businesses to make the investment required to deliver those projects, they need to know what sort of tax environment they will be operating in.  That makes providing clarity on the future of the Annual Investment Allowance an important priority for whatever Government is in place after May.”

BNP Paribas Leasing Solutions explains that the Annual Investment Allowance can be claimed for purchases made through Hire Purchase contracts and certain finance leasing arrangements.  Leasing equipment involves regular fixed costs, helping to ease cash flow, and will not impact on a business’ other credit lines, enabling it to borrow money when needed in the future.

Lease funding can also generally be accessed more quickly than other forms of lending, helping to ensure that that businesses will be able to obtain equipment in time to qualify for this year’s Annual Investment Allowance.

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