Summary. HMRC’s new guidance clarifies the Structures and Buildings Allowances (SBA) introduced on 29 October 2018, offering a 2% annual tax relief for eligible construction costs. To claim, businesses must have contracts dated post-29 October 2018, use the structure for non-residential purposes, and provide a detailed allowance statement. Thomas Nock Martin assists with these claims and other tax advice.
Since the introduction of the Structures and Buildings Allowances (SBA), on 29 October 2018, taxpayers and advisers have been waiting for clearer guidance from HMRC to better understand how to claim capital allowances on buildings.
Certain aspects of the rule were unclear. The good news is that HMRC has now published new guidance to help clear things up.
The SBA entitles businesses to new tax relief. If you build, buy, or lease a structure with construction contracts signed on or after 29 October 2018, you can potentially claim this tax relief.
How much tax relief can I claim?
You may claim a 2% annual tax relief on the costs you incur. However, you must have paid some or all the costs towards the purchase, construction or renovation of the structure.
SBA Stipulations
To be eligible for the business premises renovation allowance, all construction contracts must be signed on or after 29 October 2018 and the structure must:
- have not been used as a residence the first time it was used or during the period you’re claiming for
- be used for a qualifying activity
- have an allowance statement
How do I claim capital allowances on buildings?
To make a claim for structural buildings allowance you must complete the capital allowances section of your tax return (just like any other capital expenditure). If you have already processed your tax returns for the period in which you incurred costs, but you qualify for capital allowances on buildings, you can simply make an amendment.
To begin your claim you will need an allowance statement for the structure. If you’re the first person to use the structure, this will have to create a written allowance statement before you are able to make a claim.
The allowance statement must include the following:
- Details that identify the structure
- The date of the written contract for construction
- The expenditure qualifying for the SBA
- The total qualifying costs
- The date that you started using the structure for a non-residential activity
The statement is important because the claim period is up to 50 years. If you buy a used structure, you can only claim the structure and buildings allowance if you have a copy of the allowance statement from the previous owner. In fact, it’s important to keep information about the earliest construction contracts in your records.
At Thomas Nock Martin, our goal is to make your life easier when it comes to capital allowances on buildings or any other tax advice for businesses. For more information on business capital allowances you can call our friendly team on 01384 261300. Or take a look through our website for more useful information.
If you have found the blog helpful, you may wish to read our previous blog on How Capital Gains Tax On Property Will Change From April 2020.
