Structures and Building Allowances (SBAs) are at a flat annual rate of 3% of the cost of constructing new non-residential structures and buildings and new conversions or renovations after 28 October 2018. This annual rate rose from 2% in April 2020.
Updated 27 November 2020
Eligible expenditure includes costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence.
They will not apply to the cost of land, land remediation (such as for contaminated land), Stamp Duty Land Tax (SDLT) or equivalents in Scotland and Wales, or the cost of obtaining planning permission.
SBAs will apply to overseas structures and buildings as well, if the business is within the charge to UK tax. Expenditure on integral features and fittings of a structure or building currently allowable as expenditure on plant and machinery will continue to qualify for plant and machinery writing down allowances.
While ostensibly applying to all construction expenditure from 29 October 2018, expenditure will not qualify if any contract for the construction was entered into before that date or any contract for the construction is entered into after 28 October 2018 but a connected preparatory contract was entered into before 29 October 2018. This might include contracts with architects, quantity surveyors etc.
The sale of the asset will not result in a balancing adjustment. Instead, the purchaser takes over the remainder of the allowances over the remainder of the 33 1/3 year period.In determining the capital gain accruing on the disposal of a property on which SBAs have been claimed, the disposal consideration is treated as increased by the amount of SBAs claimed by the transferor.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.
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