The Structures and Buildings Allowance or the SBA was announced in 2018. The SBA mainly aims to relieve all the costs of the physical construction of new buildings and non-residential structures starting on or after October 29th, 2018. This was announced as a means of encouragement to invest in the construction of new buildings and structures that are meant for commercial use. This new capital allowance aims to provide tax relief on all the necessary tasks involved in the improvement of the existing buildings and structures, including the cost of converting or renovating existing premises to be used for a qualifying activity.
Therefore, the SBA has been designed for businesses that invest in renovated or newly built buildings and non-residential structures. As has been explained in the technical note, neither dwellings nor land shall be eligible for relief. In addition to that, in the case of mixed-use such as between the residential and commercial units of a building, relief shall be granted on the total amount set aside for non-residential use on a reasonable and just basis. Also, no relief is provided for workspace cost within domestic settings like home offices.
Core Structure Of The SBA
Some key features of the SBA relief are the same as were proposed originally. They are as follows:
- Relief over 50 years at a flat cost of 2%
- Available for the UK as well as overseas buildings and structures where a particular property lies within the UK tax charge
- Relief available for new buildings and commercial structures, including new renovations or conversions
- Relief is restricted to the costs associated with the physical construction of a building or a structure, including costs of land alterations that are necessary for construction, costs of demolition as well as the direct cost of bringing an asset into existence.
- It can only be claimed when the building or the structure comes into use for the first time.
- No relief is provided on rights over land, costs of land, or the cost of getting planning permissions.
The aim of the SBA, as discussed, is to avoid overall complexity. Hence, for instance, there would not be any charges or balancing allowances. That said, some aspects of the Structures and Buildings Allowance would impose certain administrative burdens that might deter take-up. As a result, businesses would require to maintain comprehensive analyses of the expenditure incurred on buildings and structures as well as all-inclusive depreciation schedules on all of them with separate schedules for renovations or any additional capital expenditure.
Periods Of Disuse
It is noteworthy that the government has mentioned that the SBA will also be given during periods when the property is in disuse. However, the draft legislation creates a certain level of uncertainty in this aspect because it would imply that a structure or a building can be considered as not qualifying use in case its extent of use is for an insignificant qualifying purpose.
Initially, some complicated rules were announced to deal with all the qualifying properties/buildings that were demolished. That said, according to the new proposal, these must be enacted according to the premise that when it is time for the demolition, any kind of expenditure on which the SBA has not been granted would be considered as a part of the overall base cost of the property in question.
The introduction of the all-new SBA demonstrates the most crucial modifications to the regime of capital allowances since the Industrial Buildings Allowances was abolished. In addition to that, this new SBA has been seen as a direct replacement by most taxpayers. As mentioned above, the Structures and Buildings Allowance is available for the new expenditure of construction on non-residential structures and buildings at 2% per annum over 50 years.
Furthermore, it will also be available to acquire new properties from developers who meet all the relevant criteria where any land element is ineligible. It has been indicated that the SBA shall not be available for those assets that qualify for PMAs or Plant and Machinery Allowances. Hence, taxpayers must continue claiming PMAs on all qualifying fixtures attached to structures and buildings, including integral features.
The Structures And Buildings Allowance Affects Who?
The majority of the businesses are entitled to claim it, given that they incur qualifying expenditure. Just like with PMAs, there are special provisions that deal with property leases, enabling both tenants and landlords to claim the SBA according to their qualifying expenditure. In addition to that, due to the fact that the SBA covers all types of properties except residential and land, it is widely available. Moreover, it also has the scope of benefitting countless taxpayers.
Do you still have questions? Get in touch with DNS Accountants where expert accountants will help you understand all the ins and outs of the SBA!