In the 2018 Autumn Budget, Chancellor Philip Hammond announced a new capital allowance, the Structures and Buildings Allowance (SBA).
Since abolishing the Industrial and Agricultural Building Allowances, no relief has been available for most structures and buildings. Addressing the gap, the new SBA seeks to encourage investment in construction for commercial activity.
Relief is given on eligible construction costs incurred on or after 29 October 2018.
An overview of the rules
The SBA will be available for new structures and buildings intended for commercial use, and the improvement of existing ones.
Businesses chargeable to income tax and companies chargeable to corporation tax will qualify. It will be limited to the original cost of construction and spread over a fixed 50-year period at an annual flat rate of 2%.
On disposal of a relevant asset, the purchaser will continue to claim the annual allowance of 2% of the original cost. No balancing adjustments will occur on sale by the vendor. For chargeable gains purposes, the allowable cost of the asset will be reduced by the total amount of relief claimed.
Relief will be available from the date the structure or building is first brought into use for a qualifying activity. Only UK and overseas structures and buildings where businesses are within the charge to UK tax are eligible.
Special provisions will apply for leasing transactions.
Included are trades, professions or vocations and certain UK or overseas properties business – essentially commercial property lettings, as residential property is excluded.
Exclusions and apportionment
Expenditure on land, or any property or buildings functioning as dwellings, will not be eligible. With mixed use, such as between commercial and residential units in a development, relief will be apportioned.
Please contact us on 01392 211 233 for further guidance.