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November 5th 2018

Budget 2018: Structures and Buildings Allowance

The all-new Structures and Buildings Allowance (SBA) will provide relief for eligible construction costs incurred on or after 29 October 2018, at an annual rate of 2% (straight line basis).

In recent years, expenditure on structures and buildings generally has attracted no immediate relief, though there are exceptions - expenditure on plant & machinery incorporated as an integral feature of a building, for example, can attract capital allowances, including the Annual Investment Allowance (AIA).

The SBA is intended to provide relief for the cost of physically constructing new structures and non-residential buildings that are intended for commercial use. Neither land nor dwellings will be eligible; where there is mixed-use, for example between commercial and residential units, relief will be reduced by apportionment.

Businesses will be able to claim the SBA over a 50 year period at an annual rate of 2% of the original qualifying expenditure. There will be no system of balancing allowances or charges on disposal; instead, a purchaser will continue to claim SBA based on 2% of the original cost. The amount eligible for relief will not be increased where the building is purchased and where it has appreciated in value.

Relief will be available for eligible expenditure incurred where all the contracts for physical construction works were entered into on or after 29 October 2018.

Expenditure on integral features of a structure or building that are currently allowable as expenditure on plant & machinery, will continue to attract capital allowances, including the AIA, under the existing regime. SBA expenditure will not qualify for the AIA.

Although no balancing charge or allowance will arise on the disposal of an SBA qualifying structure or building, for chargeable gains purposes the allowable cost of the asset will be reduced by the total amount of relief that has been claimed through the SBA.

Businesses planning to spend money on a new structure or non-residential building post 29 October 2018 will wish to understand the implications of the new SBA. As well as the pure tax aspects, there are important record-keeping matters to consider too; if there is any possibility that an SBA qualifying building might be sold at some future time, good records should be kept of the costs incurred and the relief claimed. Without those records, a potential buyer may struggle to quantify what future relief is available, which may in turn lead to a reduction in the sale price that can be achieved.

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