Businesses that incur qualifying capital expenditure on structures or buildings used for qualifying activities will be able to claim the Structures and Buildings Allowance (“SBA”) over a 50 year period to encourage investment in the construction of new structures and buildings and the improvement of existing ones – see blog Structures and Buildings Allowance – new 2% tax relief for new-build commercial properties
The SBA will be allowed as a deduction from profits at an annual rate of two percent. The relief will be available to businesses that are chargeable to income tax and companies chargeable to corporation tax.
The two percent writing down allowance will be at a flat rate, calculated on the amount of original construction expenditure.
There will not be a system of balancing charges or balancing allowances on a subsequent disposal of the asset. Instead, a purchaser will continue to claim the annual allowance of two percent of the original cost. This is intended to ensure that the cost of construction and renovation will be relieved over an average life of buildings.
The amount eligible for relief will not be increased where a structure or building is purchased and where it has appreciated in value as this does not represent the cost of construction.
Relief will not be available for structures or buildings where a contract for the physical construction works is entered into before 29 October 2018.
Anti-avoidance rules will apply to prevent manipulation of these rules.
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 within the charge to UK 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. However, land costs or rights over land will not be eligible for relief, nor will the costs of obtaining planning permission
Claims can only be made from when a structure or building first comes into use. Dwelling houses will not qualify, nor any part of a building used as a dwelling where the remainder of the building is commercial.
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 AIA. However, 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