About Structures and Buildings Allowance (SBA)
The United Kingdom Chancellor, David Lidington, on 29 October 2018 announced the introduction of a new capital allowance for buildings and structures i.e. Structures and Buildings Allowance (SBA) for new non-residential structures and buildings. The Structures and Buildings Allowance will provide assistance to enhance commercial investment in the United Kingdom, further develop the case for new structural assets, and augment tax benefits for such assets. The introduction of SBA signifies the most noteworthy transformation of the capital allowances system from the time when Industrial Buildings Allowances (IBA) was abolished. The Structures and Buildings Allowance can be availed for new construction expenses on non-residential structures and buildings, and will be distributed and paid-out in a period of 50 years at a percentage of 2% per year. The allowance is also accessible for the procurement of new properties from developers that are in-line with the pertinent standards. It is anticipated that SBAs will not be applicable for assets that meet the requirements for plant and machinery allowances (PMAs). For that reason, taxpayers must carry on claiming plant and machinery allowance on eligible fixtures (together with integral features) attached to structures and buildings.
Structures and Building allowance will increase the United Kingdom’s international affordability and attractiveness. Presently, the United Kingdom has the lowest rate of Corporation Tax in the G20, an international forum encompassing 19 countries along with the European Union, which is set to reduce further to 17% in 2020. It is anticipated that SBA will additional decrease the costs of doing trade in the United Kingdom. As per the published draft secondary legislation, relief at a percentage of 2% per year will be granted – this relief will be applicable for expenses on the building of commercial property that don’t meet the requirements of capital allowances as either machinery, plant. The left over benefits of the grant will be passed to any purchaser on a sale of the fixed asset (property).
Also Read: How to Make Corporation Tax Payment to HMRC?
Amendments Made to Draft Regulation from Technical Note
Other Draft Legislation Notes for Structures and Buildings Allowance
- The legislation does not exactly outline or provide any definition pertaining to structures and buildings. Though it does state that expenses incurred on the procurement of land, landscaping and modifying the land (except modifying land for development pertaining to a structure or building), land repossession and remediation, as well as structures/buildings for housing use will not meet the requirements for the relief
- The draft legislation positions that expenses on machinery or plant are precisely considered as debarred expenditure for the determination of Structures and Buildings allowance. This implies that taxpayers will still be required to undertake a capital allowance study for construction schemes to classify the machinery and plant
- Additionally, the draft legislation has information around topics such as highway undertakings, acquisitions from developers, interaction with Value Added Tax (VAT) and co-ownership arrangements
Key Points To Be Considered From Structures And Buildings Allowance
Preparing For The Future for Capital Allowance
With advancement in technology, professional service companies have developed their own artificial intelligence (AI) allowance tools that help to tackle the methodological and practical implications of the conversion and continuing influence of the changes.