Capital Allowances for Structures and Buildings

Category: Property & ConstructionTaxation - Posted On: Nov 16 2018

The Chancellor announced at the 2018 budget that the government will introduce a new Structures and Building Allowance (SBA) for new non-residential structures and buildings. Relief will be provided on eligible construction costs incurred on or after 29 October 2018.

The key features of the SBA are –

  • Relief to be given at a flat rate of 2% over a 50-year period
  • Relief to 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 within the charge to UK tax
  • Relief to 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 assets in to existence
  • Relief is available for eligible expenditure incurred where all the contracts for physical construction works are entered into on, or after, 29 October 2018
  • Claims can only be made from when a structure or building first comes into use
  • Land 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 on which the structure or building is constructed
  • Dwelling houses will not qualify, nor 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 purchaser will take over the remainder of the allowances written down over the remainder of the 50-year period
  • Expenditure on integral features and fittings of a structure or building that 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
  • SBA expenditure will not qualify for the AIA
  • where a structure or building is renovated or converted so that it becomes a qualifying asset, the expenditure will qualify for a separate two percent relief over the next 50 years

The Government’s aim of the SBA is to encourage investment in new structures and buildings and to improve the UK’s international competitiveness. With BREXIT on the horizon, the timing of this new allowance will no doubt be welcome.

If you are looking for advice, support or further information, please contact our head of EQ Property & Construction, Steven Todd via or call 01592 630055.