Structures and Buildings Allowance

Is there available tax relief for Structures and Building?

The Budget brought change to the capital allowances regime, including a two-year increase in the Annual Investment Allowance (AIA). The relief has risen from £200,000 to £1 million for expenditure incurred on or after 1 January 2019. The limit gave 100% tax relief on up expenditure, up to £200,000, on qualifying plant and machinery (but not cars) for businesses and owners of commercial property.

New Structures and Buildings Allowance

A new capital allowance, Structures and Buildings Allowance (SBA), will give relief for expenditure on certain structures and buildings.

Since the end of Industrial and Agricultural Buildings Allowance, no relief has been available for most structures and buildings, so, the SBA addresses the gap and is intended to encourage investment in construction for commercial activity.

Relief will be given on eligible construction costs incurred on or after 29 October 2018. Where a contract for the physical construction work is entered into before this date, relief is not available.

Key facts

The rules are subject to consultation, but the broad proposals are as follows.

Structures and Buildings Allowance will be available for, new structures and buildings that are intended for commercial use and the improvement of existing structures and buildings, including the cost of converting or renovating existing premises to qualifying use.

Relief will be available to businesses chargeable to income tax and companies chargeable to corporation tax. It will be limited to the original cost of construction or renovation, and given across a fixed 50-year period, at an annual rate of 2% regardless of changes in ownership. When the asset is disposed of, the purchaser will continue to claim the annual allowance of 2% of the original cost if the asset continues to be used for a qualifying activity. There will be no balancing adjustments on sale for the vendor.

For chargeable gains purposes, the allowable cost of the asset will be reduced by the total amount of relief claimed.  SBA relief will be available from the date the structure or building is brought into use for the first time for a qualifying activity. UK and overseas structures and buildings will be eligible where the business is within the charge to UK tax.

Special provisions will apply for leasing transactions

Where an asset is leased, both lessor and lessee may be able to claim the SBA for the qualifying expenditure that they incur on construction work. Special rules will apply where the grant of a lease is substantially the sale of the property interest, which may result in the lessee becoming entitled to the attributable SBA.

Qualifying activities

Only certain expenditure qualifies; the structures or buildings must be brought into use for qualifying activities, for example, trades, professions or vocations, and certain UK or overseas businesses like commercial property lettings.

The type of structures and buildings covered awaits final clarification but is expected to include: offices; retail and wholesale premises; walls; hotels; care homes; factories and warehouses.

Please speak to us to ensure that you maximise qualifying expenditure -

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