The Structures and Buildings Allowances (SBA) was introduced on 29 October 2018 with immediate effect and applies to both Income and Corporation tax.
The SBA is an annual tax allowance of 2% of qualifying costs over a 50-year period. It is available on capital costs of purchase, construction or renovation of most non-residential structures and buildings. The SBA must be claimed each year against taxable profit/loss, otherwise it is lost.
Eligible structures and buildings include offices, hotels, care homes, factories, retail and wholesale premises, walls, bridges and tunnels. SBA is not available on dwellings, including university or school accommodation, military accommodation, prisons and furnished holiday lets.
SBA cannot be claimed on plant and machinery (P&M), so it is important that any fixtures, integral features and other P&M is identified separately from the SBA assets. The increased Annual Investment Allowance (AIA) of £1m between 1 January 2019 and 31 December 2020 means that, in many cases, P&M additions will receive 100% tax relief in year one.
The SBA can be claimed only when the property is first brought into use. To claim SBA, the actual amount of qualifying expenditure needs to be identified, otherwise the SBA is £nil; estimates are not permitted. Therefore, it is important to capture the qualifying costs up front for each property for which a claim is to be made.
The SBA claim must be supported by a written allowance statement, which includes the date of the earliest contract, qualifying costs and the date the property is brought into use. This statement should be maintained for each qualifying asset throughout its 50 year SBA period.
When an SBA asset is sold, the purchaser inherits the remaining SBA. There are no balancing charges or allowances for the seller. Instead the amount of the SBA that has been claimed is clawed back in the chargeable gain on the sale.
If you have any questions, then please speak to your normal Ensors contact or contact Ann Minson.