Budget changes which ease the tax pain
Is there available tax relief for structures and building?
Yes, the 2018 Budget brought change to the capital allowances regime, including a two-year increase in the Annual Investment Allowance.
The relief has risen from £200,000 to £1 million for qualifying expenditure incurred on or after January 1 this year. The limit provides 100 per cent tax relief on qualifying plant, machinery and integral features for businesses and owners of commercial property.
Also, a new capital allowance, Structures and Buildings Allowance, will give relief for expenditure on certain structures and buildings. Relief will be given on eligible construction costs incurred on or after October 29, 2018.
The final rules are subject to consultation, but the broad proposals are:
SBA is available for new structures and buildings that are intended for business use (not residential) and the improvement of existing structures and buildings, including the cost of converting or renovating existing premises for a qualifying use.
Relief will be available to businesses chargeable to income tax and companies chargeable to corporation tax from the date the structure or building is brought into use for the first time for a qualifying activity.
It will be limited to the original cost of construction or renovation, and given across a fixed 50-year at two per cent straight line regardless of changes in ownership.
When disposing of the asset, the purchaser will continue to claim the annual allowance of per cent of the original cost if the asset is still used for qualifying activity.
There will be no balancing adjustments on sale for the vendor. We are happy to help assist you with the calculations for chargeable gains purposes. Special provisions will apply for leasing transactions.
Only certain expenditure qualifies. It must be in use for qualifying activities, for example, trades, professions or vocations, commercial property lettings and certain UK or overseas businesses.
The type of structures and buildings covered also awaits final clarification but is expected to include offices, retail and wholesale premises, walls, hotels, care homes, factories and warehouses.
It is not expected that furnished holiday lettings will qualify.
Sarah Davies is a member of Whittingham Riddell’s specialist Agricultural Team.
