Structure and Buildings Allowance

Q. I am thinking about acquiring a new premises for my business and I heard about the new Structure and Buildings Allowance that has recently been introduced, how does this work?

A. It was announced in the Autumn Budget 2018 that a new form of capital allowance is to be introduced called the Structure and Buildings Allowance (SBA). This new allowance allows taxpayers to claim tax relief on capital expenditure incurred on non-residential construction projects whether these are new builds, refurbishments of a property or fit-outs. This new allowance is not available to be claimed for expenditure on the purchase of any land, dwellings or obtaining planning permission.

The SBA allows a 2% straight line deduction that can be claimed over a 50 year period. However, the SBA is only for projects where the related contract was entered into on or after 29^th October 2018. Any contracts entered into prior to this date will not qualify for the SBA, even if expenditure is actually incurred after 29^th October 2018.

Expenditure on a building or structure for ‘residential use’ will not qualify for the SBA. If a building is split into part residential and part non-residential, only the expenditure on the non-residential section may qualify for the SBA.

Perhaps, the main disadvantage of the SBA is it’s interaction with Capital Gains Tax, and the base cost of the asset purchased. When the SBA is claimed, the base cost of the asset is reduced by the amount of SBA that is claimed. This will result in a full or partial claw back of the SBA that has been claimed, if the asset is sold at some point in the future.

There are a number of factors to consider when looking at a claim for the SBA, and detailed advice, taking into account individual circumstances, should always be obtained.

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