Structures and buildings allowances

The cost of acquiring your business premises may be written off in your accounts, but for many years those costs have been disallowed for tax purposes so there is no tax relief until you sell the building. 

 

In October 2018 the government introduced a new structures and buildings allowance (SBA) to relieve the costs of constructing or altering buildings to be used for business purposes. The costs incurred are spread over 50 years with a flat 2% of the total cost deducted from profits each year. A claim can only be made when the building is brought into use for the trade. 

 

If the building is sold within 50 years, the new owner claims the remaining costs at the same 2% flat rate. The previous owner does not receive a balancing allowance. To calculate the gain or loss on disposal, the SBA claimed is deducted from the construction costs of the building. This has the effect of reducing the base cost for capital gains purposes and increasing the tax payable on the sale of the building. 

 

The SBA cannot cover the cost of acquiring land or constructing or altering residential properties. The contract for the building works must be entered into on or after 29 October 2018. 

Please do let us know if you have any questions or if you need any further help understanding the guidance – please call us on 01932 564098 or message us here. 

 

This note was published from our Spring 2019 Tax Briefing dated March 2019 

 

Please be aware that the information above may have changed in subsequent months. 

 

This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.