At Budget 2018, the government confirmed that businesses would be entitled to a new tax relief for commercial property – the Structures and Buildings Allowance (SBA) – designed to encourage investment of this nature.
Following the changes to the rules, HMRC issued further technical guidance at the end of October 2019 in a bid to clear up some confusion around certain aspects of the allowance – albeit complex in itself.
What is the Structures and Buildings Allowance (SBA)?
If you build, buy, lease or renovate a structure and all construction contracts were signed on or after 29 October 2018, you may be able to claim an annual 2% tax relief on certain expenditure, for up to 50 years.
You must have paid some or all the costs towards the purchase, construction or renovation and the structure in question must:
- have not been used as a residence the first time it was used or during the period that you are claiming for;
- be used for a ‘qualifying’ activity; and,
- have an allowance statement.
As detailed on HMRC’s website, the allowance will apply where the structure is used, or has been used in the last two years, for one of the following qualifying activities:
- any trades, professions and vocations;
- a UK or overseas property business (except for residential and furnished holiday lettings);
- managing the investments of a company; and
- mining, quarrying, fishing and other land-based trades such as running railways and toll roads.
What expenditure does the Structures and Buildings Allowance cover?
If you paid over the market value for a structure or its construction costs, you can only claim for the original market value. Eligible costs broadly encompass:
- fees for design;
- preparing the site for construction;
- construction works;
- renovation, repair and conversion costs; and,
- fitting out works.
Where expenditure qualifies for the Plant and Machinery Allowance (PMA), it will not attract SBA. Costs relating to residential properties, land, planning fees and Stamp Duty Land Tax (SDLT) are also ineligible.
Claiming the Structures and Buildings Allowance
Claims for SBA must be made via your tax return and, HMRC has advised, must be evidenced with a written allowance statement which includes the following details:
- an address or description by which the structure can be identified;
- the date of the earliest written contract for construction;;
- the total qualifying costs; and,
- the date that you started using the structure for a non-residential activity.
If you purchased a used structure, you should ensure that the seller provides a copy of the allowance statement to you and, vice versa, if you are selling a structure you should ensure that you give a copy of the allowance statement to the buyer.
How can George Hay help?
Whether you are buying, selling or renovating a commercial building, or if you are thinking about investing in plant and machinery, our professional advisers can help you to understand your capital allowances position and maximise the value and success of any claims that you make.
To discuss your circumstances in more detail with one of our experts, contact us today.