Capital Allowances Structures and Building Allowance (SBA’s)
What are Structures and Building Allowances (SBA’s)?
SBA’s will provide tax relief on eligible construction, renovation or conversion costs incurred on or after 29th October 2018, at an annual rate of 3% on a straight-line basis over a 33 and third-year period, once trade has commenced in the building.
The key highlights are listed below:
- Relief will be given at a flat rate of 3% over a 33 and a third-year period.
- Relief will be available for new commercial structures and buildings, including costs for new conversions or renovations.
- Relief is available for UK and overseas structures and buildings, where the business is liable for UK Corporation Tax.
- Relief will be limited to the costs of physically constructing the structure or building, including costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence.
- Relief is available for eligible expenditure incurred where all the contracts for the physical construction works were entered into on or after 29th October 2018.
- Claims can only be made from the point in time when a structure or building first comes into use and costs or rights over land will not be eligible for relief, nor will the costs of obtaining planning permission.
- The claimant must have an interest in the land upon which the structure or building is constructed.
- Dwelling houses will not qualify, nor will any part of a building used as a dwelling where the remainder of the building is commercial.
- Sale of the asset will not result in a balancing adjustment – instead, the purchase takes over the remainder of the allowances written down over the initial 33 and a third-year period.
- Expenditure on integral features and fittings of a structure or building, which are currently allowable as expenditure on plant and machinery, will continue to qualify for writing down allowances for plant and machinery including the Annual Investment Allowance (AIA) up to its annual limit, currently set at £1m.
- SBA expenditure will not qualify for AIA where a structure or building is renovated or converted so it becomes a qualifying asset, the expenditure will qualify for a separate 3% relief over the next 33 and a third-year period.
Qualifying SBA expenditure includes:
The costs related to construction of structures or buildings, including costs of demolition or land alterations necessary for construction. Revenue expenditure incurred as a deduction when calculating profits of the business are excluded. SBA’s also include incidental repairs, but excludes the cost of the land and any expenditure incurred in altering the land through reclamation, remediation and landscaping, and in obtaining planning permission.
Do SBA’s replace the current Capital Allowances scheme for fixtures in a building?
As SBA’s do not replace the current Capital Allowances scheme for fixtures in a building whereby relief is given at 18% on plant and machinery and 8% on integral features, and considering that businesses can also claim 100% first year allowance up to £1m, it is important to review entitlement and claim Capital Allowances relief in the most beneficial way.
HOW CAN WE HELP?
At Innovation Tax our specialist Capital Allowances team comprising RICS surveyors and tax experts
offer the professional expertise and experience required to fully maximise and submit a robust Capital Allowance claim to HMRC.