Capital Allowances for structures and buildings
Structures and buildings allowances (SBA’s) is an entirely new tax allowance available for
certain expenditure on non-residential buildings and structures.
The government wants to encourage more construction in the UK and to bring old assets back
into use with the conversion, renovation and improvement of existing buildings.
SBA’s are not to be confused with Industrial Buildings Allowances (IBA’s) which were abolished in the 2007 budget.
The removal of IBA’s left a large gap in the capital allowances regime.
Once IBAs were completely phased out in April of 2011 much of the capital expenditure on the
“bricks and mortar” elements of commercial buildings did not attract any tax relief. Capital
allowances were only applicable to expenditure on plant and machinery. Buildings were
specifically excluded. All this changed again in October 2018, when it was announced in the
budget that a new category of capital allowances was to be introduced from that 29 October.
The devil is in the detail.
At the time of writing this article, we are waiting for detailed guidance
from HMRC because the draft legislation is lengthy and complicated.
What we do know about the key aspects of SBA’s:
SBA’s apply to new capital expenditure on structures and buildings on contracts signed
after 29 October 2018
The relief will be limited to the original cost and will be given at 2% per year for 50 years
Land costs, landscaping and planning fees are excluded
Expenditure on dwellings(residential) is excluded
The expenditure will not qualify for SBA’s if it qualifies for plant and machinery
allowances or integral features allowances first
The date of “first use” will trigger the ability to start claiming the allowances
Notional allowances will be given for periods of temporary disuse
When the property is sold, any unused SBA’s will pass to the new owner and the seller
gets to keep what they have claimed so far
An allowance statement will be required, or the expenditure will be deemed to be nil
A General awareness of the new regime now will help with the necessary paperwork and a
successful claim later. Detailed record keeping will be essential if you want to make a valid SBA
claim. Further advice should be obtained if you are considering making a capital allowances
claim on embedded fixtures that qualify for tax relief.