Allowances and tax credits help a business to survive by claiming the tax breaks the government makes available. An example being the investments you’ve made in building commercial or business-related structures, with Structures and Buildings Allowance (SBA), you get tax relief against your cost to grow and expand your business.
Here, we explain more about Structures & Building Allowance (SBA).
What Qualifies for SBA
The Structures and Buildings Allowance (SBA) is one of the most significant changes in capital allowances in recent years. Since the end of the Industrial Buildings Allowance (IBA), there has not been anything significant that could replace that allowance.
New construction on non-residential buildings is the primary qualifier for this kind of allowance. The allowance is calculated over 33 and third years and the rate is currently 3% per annum. It’s available for new properties that meet a specific kind of criteria, with the land element being ineligible for this allowance.
Assets such as plant, machinery, fixtures and fittings are not eligible for SBA, nor are integral features. These items continue to qualify for Capital Allowances, including the Annual Investment Allowance (AIA), and will continue to be calculated separately.
Be aware that new commercial structures and buildings can fall under the terms of this relief as well as creating a new conversion or renovation works.
The UK construction industry is seeing some huge changes. If you’re building in the UK or overseas, you can still potentially make a claim as long as you pay UK taxes.
Your 3% over a 33-year period will be limited to what it costs you to actually build the structure of the building. However, these costs could extend to demolition, land alterations, and any direct costs that create an asset in the first place.
This relief and allowance program has come into effect for projects that commence after the end of October 2018. Take the time to research the measure because the provisions for commencement are complex and unique. There are anti-avoidance measures that keep taxpayers from manipulation of the relief.
If you entered into your contract before 29 October 2018, including any preparatory work, you might be disqualified. The physical construction works need to be agreed upon after that date if you want to ensure that you can qualify for this relief.
The relief becomes available from when the building or structure is bought into use. There are further rules to consider if the building ceases to be used for a period of time.
Limitations of SBA
When you want to make your claims, you need to be aware that there are some limitations to this relief.
A claim begins when the building or structure is bought into use.
The rights over your land or any land costs aren’t eligible for relief.
Residential dwellings do not qualify for this relief. Even if you’re holding a mixed-use property where most of the structure is used as commercial, the part that is residential is prohibited and apportionment will apply.
Renovating or converting a structure or building makes things complicated. If you’re doing so to make it a qualifying asset under these terms, you may end up qualifying for a separate relief.
If you’re unsure about the kind of relief that you’re going to qualify for, speak to us!
To see an example, click here