The introduction of a new Structures and Buildings Allowance (SBA) represents the most significant change to the capital allowances regime since the abolition of Industrial Buildings Allowances, and many taxpayers will no doubt see the SBA as a direct replacement.
The SBA will be available for new construction expenditure on non-residential buildings and structures and will be given over 50 years at a rate of 2% per annum. It will also be available for the acquisition of new properties from developers that meet the relevant criteria (any land element being ineligible).
The initial indication is that SBAs will not be available for assets that qualify for plant and machinery allowances (PMAs). Therefore, taxpayers must continue to claim PMAs on qualifying fixtures (including integral features) attached to buildings and structures.
Most businesses will be entitled to claim the SBA, subject to incurring qualifying expenditure.
As with PMAs, there will be special provisions dealing with property leases; allowing both landlords and tenants to claim in respect of their qualifying expenditure.
Further, because the SBA will cover all property types (other than land and residential), it will be widely available, and has the potential to benefit a large number of taxpayers. In particular expenditure on office and retail structures is in scope.
The headline is that the new relief will apply for construction works commencing on or after 29 October 2018. However the commencement provisions are relatively complex, and include anti-avoidance measures to prevent taxpayers altering existing arrangements to fall within the relief.
The key requirement is that all contracts for the physical construction works must be entered into on or after 29 October 2018. Where this is not the case, the SBA will not be available to the current owner or to any successors in title (in respect of the relevant construction works). The structure or building must also be in use (or used within the last two years) in order to claim the annual allowance, which is a key difference to PMAs.
We welcome this further form of capital allowances to incentivise investment in buildings and infrastructure assets that are used by businesses in the charge to UK tax. Following the issue of primary legislation in Finance Bill 2018/19, the government intends to consult on some of the features of this new regime. We recommend businesses participate in the consultation, and familiarise themselves with the qualifying criteria.