The structures and buildings allowance was introduced as part of the 2018 Budget. The aim of this form of tax relief is to encourage investment in the building of new structures and the renovation of existing structures, for the purpose of conducting a trade or for non-residential use. The tax relief can be claimed where construction begins on or after 29 October 2018, by individuals, partnerships and limited companies. The relief is not available for buildings used for residential purposes only.
Capital allowances
The structures and buildings allowance is classified as a capital allowance within all tax returns. The new tax relief can be claimed at a flat rate of 2% per year on qualifying expenditure for up to 50 years, at which time full relief would have been given. In order to qualify for the allowance, you must have paid a proportion of the costs for the construction or renovation of the building. If the structure has a dual purpose, i.e. for both commercial and residential use, the costs can be apportioned with the 2% relief being claimed on the commercial costs. However the business use must be significant.
How to claim
Structures and buildings allowances must be claimed through a tax return. In order to make a claim you also need to create an allowance statement. This needs to include the following information:
- Building / structure details (address, purpose)
- Date of the earliest written contract for construction
- The total qualifying expenditure incurred
- The date the building/structure was first used for non-residential activities
You can claim at the later of either the date you started using the structure for a trade or qualifying activity, or the date you are due to pay for the construction or renovation.
Buildings expenses non-eligible for allowances
There are a few expenses which are not allowable for the purposes of the structures and buildings allowance. If you have an item which qualifies for another capital allowance as well, you are unable to claim both allowances. You are also unable to claim allowances for professional fees & financing costs. Examples of these are planning permission, stamp duty, loans and grants. If you are purchasing the building from a developer, the proportion of the cost related to the land would be non-eligible. For residential and furnished holiday lettings you are also unable to claim the structures and building allowance.
Selling the structure
If you sell or dispose of the building/structure you can no longer claim the structures and buildings allowance. You need to provide the new owner with a copy of the allowance statement, so they are able to claim the allowances going forward. The allowance will continue based on the original qualifying expenditure and over the remainder of the original 50-year period, assuming the building continues to be used for the purposes of a business. With regard to capital gains tax, the allowances claimed are added to the gain/loss on the sale, if the expenditure is included as part of the deduction from the proceeds. In effect, there is a clawback of the relief that has been given via SBAs.
If you would like to discuss the structure and buildings allowance and other capital allowances, please do get in touch with our team of tax specialists at DRG Chartered Accountants. We would be delighted to hear from you.
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.
