Construction Expenses and the new Structures and Buildings Allowance (SBA)

Construction Expenses and the new Structures and Buildings Allowance (SBA)

SBA, introduced in 2018, is designed to give an immediate relief against taxation for any capital expenditure on buildings for which there is no other relief (such as capital allowances).

The rate is calculated at 2% per annum of the cost to construct a building or structure.

Commercial buildings only are eligible; residential buildings do not qualify but this does not exclude nursing homes, hotels, and aparthotels.

Michelle Malone, Tax director at ASE Global, commented that taxpayers should be aware that “there are four rules that need to be considered in relation to expenditure and excluded expenditure in particular;

  • Land cost is excluded
  • Costs can be excluded if they are “excessive” and exceed the market value
  • Plant and Machinery costs are excluded
  • Revenue expenditure, by definition, is excluded.”

She added that “in order to make a valid claim for the SBA relief, the taxpayer must provide HMRC with the date of the purchase / construction contract, the amount of the SBA claimed and the date of first use of the building. Accurate record keeping is therefore essential”

Thereafter, if the building is sold, the vendor is obliged to transfer the SBA pool to the purchaser. Michelle pointed out that “the value of SBA claimed by a vendor is then added back to the purchase price of a building when it is sold to a third party in order to determine the capital gain”.

Concluding her remarks Michelle queried whether this relief would have universal appeal but foresaw that motor retailers would be amongst the most interested of taxpayers in future.

In case of any questions please contact at Michelle.Malone@ase-global.com
Tel:  +44 (0)161 493 1930