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The New Structures and Buildings Capital Allowance

The Budget 2018 had some good news for our commercial property developer clients when it was announced that the government will introduce a new Structures and Buildings Allowance (‘SBA’) in the Finance Bill 2018-2019 once it has received royal assent. 

What is the SBA?

The SBA will provide relief for qualifying capital expenditure on new non-residential structures and buildings (which includes costs for new conversions or renovations and demolition costs).  Relief will be provided on eligible construction costs incurred on or after 29 October 2018 at an annual rate of 2% on a straight-line basis over a 50 year period.

Why have the government introduced the SBA?

The government have explained that the SBA is intended to help stimulate business investment in the UK economy by providing this incentive for businesses to invest in commercial structures and buildings.  Businesses will be able claim this relief as a deduction of their taxable profits as a capital allowance and the government will monitor the incentive through information collected from tax returns. 

Will the SBA cover all my costs?

Please note that the relief will not apply to planning permission costs, the cost of the purchase of the land or costs relating to rights over land.  Please see the technical note for further information.

What if I sell the property?

When the property is sold the subsequent purchaser of the property will be able to take over the remainder of the SBA which is written down over the remaining part of the 50 year period.

When can I claim the SBA?

The SBA will be able to be claimed once the first qualifying activity is carried out at the structure or building, however do not leave it too long to begin the qualifying activity because if more than 7 years pass between the expenditure being incurred and the qualifying activity commencing then the SBA cannot be claimed.  If relief is not claimed, it will not be able to be carried forward to a later period and will be lost.  Relief will also not be able to be claimed whilst the structure or building is used for non-qualifying use.

 

For further information on what expenditure will qualify for SBA or not, the timing and amount of relief available, the treatment for particular transactions and leasing transactions, anti-avoidance provisions, commencement conditions and the next steps, please refer to the following note published by the government: https://www.gov.uk/government/publications/capital-allowances-for-structures-and-buildings-technical-note

If you would like to speak to us about this, please contact the Real Estate team here.

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