HM Treasury and HMRC have recently published a summary and response document relating to the consultation on a new capital allowance for structures and buildings (SBA).
Broadly, the SBA allows businesses that invest in new builds or renovations on or after 29 October 2018, to claim tax relief at 2% a year on eligible costs.
A technical note outlining the key features of the allowances was published at Autumn Budget 2018, with the subsequent draft legislation released for consultation at Spring Statement 2019. Power to introduce the new allowance was contained in FA 2019, s.30. Detailed legislation will be introduced by Statutory Instrument, which is currently being laid before parliament.
Key features of SBA include:
- relief will be given at 2% flat rate over a 50-year period;
- relief will be available for new commercial structures and buildings, including costs for new conversions or renovations;
- relief will be 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;
- relief will be available for eligible expenditure incurred where all the contracts for the physical construction works were entered into on or after 29 October 2018;
- claims can only be made from when a structure or building first comes into use;
- relief will not be available for land costs or rights over land;
- relief will not be available for costs of obtaining planning permission;
- the claimant must have an interest in the land on which the structure or building is constructed;
- relief will not be available for dwelling houses, 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 remaining part 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 AIA, up to its annual limit;
- SBA expenditure will not qualify for the Annual Investment Allowance (AIA);
- where a structure or building is renovated or converted so that it becomes a qualifying asset, the expenditure will qualify for a separate 2% relief over the next 50 years.
As a result of the consultation process some features have been amended, including those relating to short-term leaseholds, eligible pre-trading costs, periods of disuse, and reducing claimants’ administrative burdens.
The summary of responses to the consultation can be found here.
The (draft) Capital Allowances (Structures and Buildings Allowances) Regulations 2019 can be viewed here.