In what we now know was Philip Hammond’s last Budget speech, he announced the introduction of a new capital allowance for structures and buildings.
For those that remember industrial buildings allowances, this appeared to be a ‘déjà vu’ moment but there are some key differences to the new regime. See below for our quick guide on what you need to know about this new allowance.
WHO WILL IT APPLY TO?
Businesses incurring qualifying expenditure on new non-residential structures and buildings will be able to benefit from the new structures and buildings allowance (SBA).
WHEN DOES IT APPLY FROM?
SBA’s can be claimed for construction contracts entered into on or after 29 October 2018. Care should be taken where the contract forms part of a series of works, however, as HMRC may look to deny relief where a ’linked’
construction contract was entered into prior to this date.
WHAT EXPENDITURE WILL QUALIFY?
Costs relating to the physical construction, renovation or conversion of a structure or building are eligible for the SBA. This includes demolition and land alterations but will not extend to the cost of the land itself, rights over land, or costs connected with obtaining planning permission.
WHAT RELIEF IS GIVEN AND WHEN?
Relief at an annual rate of 2% will be given on a straight-line basis over a 50 year period from the point that the building is brought into qualifying use. SBA qualifying costs are not eligible for the annual investment allowance.
HOW DO YOU CLAIM?
Relief can be claimed via the business tax return but an allowance statement must also be completed including information such as the date of the written construction contract, details of qualifying expenditure incurred, the date the building was first brought into use and any other ‘supplementary’ information.
WHAT HAPPENS WHEN I DISPOSE OF THE PROPERTY?
No balancing adjustments will arise on disposal of the property, however, for capital gains tax purposes, any relief given under the SBA will be deducted from the base cost of the property. The purchaser can continue to claim SBA’s over the remainder of the 50 year period.