March 21, 2019

On 12 February 2019, the Finance Act 2019 was given Royal Assent, which included the provision for the introduction of the new Structures and Buildings Allowance (SBA) that was announced in the Autumn 2018 budget.

Although this did not make it to Phillip Hammonds speech, it represents the largest change to the capital allowance regime for some time.

It was announced back in 2007 that the Industrial Buildings Allowance (and Agricultural Buildings Allowance) were to be withdrawn over a four-year period.

Since this time, expenditure on the construction of most structures and buildings has been restricted to only that which would qualify as “integral features”, such as electrical systems, lifts and air conditioning systems.

The SBA is therefore very welcome.

The highlights of the draft measures are:

  • It will be available for new construction costs (excluding that of land and planning permission) on non-residential buildings incurred on or after 29 October 2018
  • The allowance is on a straight-line basis of 2% over 50 years
  • Residual allowances pass on to the next owner
  • Overseas buildings will qualify on the basis as for a UK asset,
  • where the business is within the charge to UK tax
  • Where preparatory work has already been undertaken before 29 October 2018, such as clearance of an existing site, unconnected to the eventual structure of the building, the project may still qualify.
  • Where an asset ceases to be in use, then relief can be claimed for a further period of up to two years and again when the asset is brought back into use.

Sensibly, anti-avoidance measures have been included. For instance, where contracts for physical construction works are entered into before 29 October these will not qualify, nor will other instances whereby physical construction has started by this date.

There has been some concern by interested parties, such as ICAEW, that although the passing on of the remaining allowances to the next owner seems attractive in its simplicity, in practice this will require the retention of original construction costs for up to 50 years, in which time the ownership may have changed hands many times and the property may even be overseas to add further risk of information being lost over time.

We will see if the final detail takes account of this, and other concerns raised, but the main detail is expected to be unchanged.

If you are looking to invest in buildings, perhaps as a developer or investor, speak to a Barnes Roffe partner about how these allowance, as well as other pertinent matters of consideration.


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