Structures and Buildings Allowance – Tax Relief
Following the introduction in the Autumn 2018 budget, draft legislation for the new Structures and Buildings Allowance (SBA) was first published in March 2019 and revised further in June 2019 following initial consultation.
The tax relief will be available for new construction expenditure on non-residential buildings and structures that does not qualify for capital allowance as either plant and machinery or integral feature. Renovation and conversion of existing commercial buildings and structures will also qualify. The relief applies to all contracts for physical construction work entered into on or after 29 October 2018 and will be given at a flat rate of 2% per annum over 50 years.
Qualifying buildings and structures
The SBA is intended to stimulate investment in buildings and structures used for commercial activity. Therefore, buildings and structures that are in residential use are not eligible for the relief, which include the following:
- a dwelling house
- residential accommodation for school pupils
- student accommodation
- residential accommodation for members of the armed forces
- home or other institution providing residential accommodation
HMRC’s technical note confirms that premises used as hotels and care homes, however, will qualify for SBA. Where there is mixed use of a building and structure, then relief will be reduced by apportionment.
The SBA is only available on direct costs that are related to the physical construction of an asset. The relief does not extend to all expenditure of a new construction project. Examples of excluded expenditure include: –
- expenditure on land and acquiring right over land
- alteration of land, including landscaping and cost incurred in remediating the land;
- cost exceeding the market value or the normal and reasonable cost to incur such work
- revenue expenditure.
Claiming the relief
The SBA can only be claimed after the building or structure has been used. There are also special provisions in the draft legislation dealing with property leases; allowing both landlords and tenants to claim in respect of their qualifying expenditure. The claimant must also be able to satisfy an “allowance statement”, otherwise the qualifying expenditure is deemed to be nil.
The following must be included in the “allowance statement”: –
- date of the written contract for the construction work;
- amount of qualifying expenditure incurred on the construction;
- the date on which the building or structure was first brought into non-residential use.
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