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 cessation of Industrial Buildings Allowance (IBA), which was abolished in 2008, there has not been anything significant to replace it.
New construction on non-residential buildings is the primary qualifier for this kind of allowance. The allowance is currently claimable over 33 and third years at a rate of 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.
See an example.
The UK construction industry is seeing some huge changes, and if you are building in the UK or overseas, you can still potentially make a claim as long as you pay UK taxes.
Claimable costs eligible for Structures and Buildings Allowance can extend to demolition costs, alterations to land, and any direct costs that create an asset in the first place.
This relief became available for expenditure on or after 29 October 2018, provided that any contracts for construction were entered into on or before that date. As with all allowances, there are anti-avoidance measures that keep taxpayers from manipulation of the relief.
It’s important to understand the limitations of Structures and Buildings Allowance.
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.
Note that the relief only becomes claimable from when the building or structure is bought into use, and there are further rules to consider if the building ceases to be used for a period of time.
Limitations of Structures and Buildings Allowance
When you want to make your claims, you need to be aware that there are some limitations to this relief, and certain criteria to comply with.
A claim begins when the building or structure is bought into use.
It is important to note that if the property is sold in future, there is a potential clawback of the allowance via the corporation tax/capital gains tax system.
Residential dwellings do not qualify for this relief. If you have a mixed-use property where part of the property is residential and part is commercial, the part that is residential is prohibited and an apportionment will need to be applied.
If you have a long-term lease on a property then the relief is particularly beneficial as your leasehold expenditure may qualify for the relief, but as you are not the property owner you will not suffer a clawback of the relief should the property be sold in future.
No documentary evidence of the claim needs to be submitted with a tax return; however, it is necessary to prepare key documentation and statements.
If the property is sold during the period of claiming the allowance, it will also be necessary to pass key information to the purchaser, as the purchaser can continue to claim the remaining unclaimed allowance moving forward.
If a further claim is made for an allowance on a new building or structure, it will be necessary to compile an additional statements to support that claim.
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Our expert team are here to help answer any of your capital allowances questions or enquires you have about your commercial property.