Structures and Buildings Allowance – draft legislation

Tue 19 Mar 2019

The Government has published draft legislation in respect of the Structures and Buildings Allowance (SBA) announced in Budget 2018 (see our earlier blog). Comments are invited by 24 April 2019.

SBAs offer a 2% annual writing down allowance over a period of 50 years for the costs of non-residential buildings incurred on or after 29 October 2018.  Any allowances claimed will reduce the base cost of the property for capital gains tax purposes.

The draft legislation now includes further details relating to periods of disuse, demolition events, lease interest acquisitions, the interaction with R&D allowances and the evidencing of qualifying expenditure (see below).

Please get in touch with a member of the Mazars Corporate tax team to discuss the impact of structures and buildings allowances for your business.

Periods of disuse

Relief will continue to be available during periods of disuse of the structure or building concerned.

Demolition

Demolition will be treated as the disposal of a building or structure. Any unrelieved expenditure on demolition will be treated as additional base cost expenditure in arriving at the gain or loss for chargeable gains purposes.

Leases

Where leases are granted in excess of 35 years and the amount paid as a capital sum by the lessee is 75% or more of that capital sum plus the value of the interest in the property retained by the lessor, the relevant interest in the structure or building is treated as transferred to the lessee. Once the lease expires, the relevant interest is treated as reverting back to the lessor.

Research & Development

If the purchaser of a building is entitled to R&D Allowances under Part 6 CAA 2001 in respect of the building, the amount of qualifying expenditure is reduced by the amount of qualifying expenditure for R&D Allowances (such that it is not possible to obtain multiple allowances on the same expenditure). A restriction also applies to the extent that the seller was able to retain R&D allowances in respect of the original construction cost of the building.

Evidence of qualifying expenditure

In order for a taxpayer to claim for expenditure qualifying for SBAs, it must meet the allowance statement requirement. The taxpayer that incurs the original construction expenditure must prepare an allowance statement and this must be passed on to any subsequent owners of the building. The statement must confirm in writing:

• the date of the earliest written contract for the construction;
• the amount of qualifying expenditure incurred on original construction;
• the date on which the building or structure is first brought into non-residential use; and
• other information as may reasonably be required by HMRC.