Structures & Buildings Allowance (SBA) Update

Since the introduction of the Structures and Buildings Allowance (SBA) from 29 October 2018, Businesses and accountants need to consider whether the processes currently used are sufficient so they have the correct information required to substantiate a claim. If they do not then claims may be rejected by HMRC.

SBA was introduced at the Autumn Budget of 2018. It provides tax relief for expenditure on structures and buildings which previously received no form of capital allowances. The main exclusion from SBA is residential buildings. Relief is available for capital expenditure on both new buildings and extensions/refurbishments of existing premises. This is provided all contracts for construction work were entered into on or after 29 October 2018.

Guidance for Structures and Buildings Allowances (SBAs)

The key points to be gleaned from the guidance are:

• Qualifying ‘construction costs’ include fees for design, site preparation, renovation, repair, conversion and fitting out works;
• Where a building or structure is acquired unused from a developer, the SBA claim is based on a just and reasonable apportionment of the purchase price (separating the value of land, buildings and plant and machinery fixtures). However where a building is acquired used from a developer, SBA is limited to the developer’s original construction cost. Please note in this scenario the apportioned value of fixtures is not restricted, and is based on the purchaser’s actual expenditure;
• Exclusions from eligible expenditure include residential buildings, qualifying plant and machinery, allowable revenue repairs, planning permission, financing costs, land and landscaping costs, and legal expenses. As a result, a detailed cost analysis will need to be prepared before claims are submitted;
• An allowance statement will need to be submitted with the first claim in a tax return for each separate construction project, detailing the date of construction contract, qualifying SBA expenditure identified and date of first use following completion. Purchasers of second-hand property must obtain a copy of the allowance statement from any previous owner of the property, which again must be submitted alongside their first claim; and
• On disposal of the structure, the total SBA received will be added to the disposal proceeds for the purposes of calculating any chargeable gain or loss.
• The rate per annum that can be claimed for SBAs is 3% of the total, meaning a the whole value is written off over a period of 33 1/3 years.

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If you have any questions with regards to Structures and Buildings Allowance you can email us using info@curtisplumstone.com or complete our contact form