1.10 (SBA) Capital Allowances for Structure and Buildings

Question 1

What happens if an accounting period straddled 6 April 2020? re: SBA

DOUBLE CHECK INFO AS 6 April DOESN’T APPLY TO COMPANIES

Answer 1

The allowance is calculated on a time-apportioned basis. With the 2% rate applying for the number of eligible months in the accounting period before April 2020 and the 3% rate applying for the number of eligible months in the accounting period from April 2020.

Question 2

What is the Structural and Buildings Allowance (SBA)? x3

What are 2 important things to remember?

Answer 2

• A SBA of 3% per annum on qualifying expenditure can be claimed for a new building (or structure) that is used for the purpose of trade.
• Renovation/conversion of an existing building
• Where construction begins on or after 29 October 2018 and the first use of the building is non-residential.
• used for the purpose of trade
• first use of the building is non-residential

Question 3

• What expenditure qualifies for SBA relief? x2 (for example?) x4
• What are the only costs you can claim for construction costs? x5
• What if the expenditure is incurred before the business starts?
• What is SBA not available for? x4

Answer 3

1. The capital expenditure incurred on the construction of the building (or structure) eg - office, retail premises, factories and warehouses
2. Costs of land preparation necessary for construction and demolition

You can only claim on construction costs, which include:
- fees for design
- preparing the site for construction
- construction works
- renovation, repair and conversion costs
- fitting out works

If expenditure is incurred before the business starts it is treated as being incurred on the date the business starts.

NOT AVAILABLE FOR:

• the cost of acquiring the land ie stamp duty land tax
• residential buildings ie dwelling, accommodation for pupils, students and prisons,
• obtaining planning permission,
• cost of land

Question 4

How is the relief calculated? re: SBA

FIND A QUESTION FROM OLD MATERIAL

Answer 4

A straight line basis not WDA

SBA = qualifying expenditure x 3% x (number of months in AP before sale/12)

Question 5

Are there any adjustments re: SBA for short accounting periods?

Answer 5

SBA is decreased for short accounting periods.

Question 6

If SBA relief is claimed, will there be a balancing adjustment on disposal?

Answer 6

No balancing adjustment on disposal if SBAs have been claimed.

Remember SBA relief is a standalone relief, i.e. if claimed NO OTHER RELIEF can be claimed.

Question 7

How is the SBA relief calculated in the hands of the buyer when the asset has been sold?

Answer 7

The buyer will need to use the original cost of the asset (ie the amount the seller paid) to calculate the relief.

Question 8

What happens if the use of the building changes? Can SBAs still be claimed? x3

Answer 8

• If the building ceases to be used for any purpose, it is treated as still being used for business purposes and SBA can still be claimed.
• If the building starts being being used for residential purposes you can no longer claim SBAs.
• If building is used part business and part residential, SBAs can be claimed on the business use portion.

Question 9

Where in legislation can SBA be found?

Answer 9

CAA 2001 s.270AA, s.270CF (info not in my version)

Question 10

If expenditure qualifies for SBAs can it qualify for AIAs?

Answer 10

Expenditure which qualifies for the SBA is not qualifying expenditure for the purposes of the AIA.

Question 11

What document is needed in order for SBAs to be claimed?

Who is the only person that can make the document?

Answer 11

A SBA can only be claimed if the person who initially incurred the construction expense makes an “Allowance Statement”.

Question 12

What does the “Allowance Statement” set out? re: SBA x3

Answer 12

It sets out:

• the date of the contract for construction
• the amount of qualifying expenditure
• the date the building was first brought into use

Question 13

What is the interaction with Capital Gains Tax? re: SBA

What is the effect of the above?

Answer 13

When a building (or structure) SBAs has been claimed for is disposed of, the consideration for the disposal is increased by the total amount of SBAs claimed when calculating the gain (or loss) for CGT purposes.

This effectively claws back the allowances previously given.

Question 14

If the buyer acquired a building unused, how will the SBA be calculated?

Answer 14

You would use the purchase price (the buyer paid for the unused building) to calculate the SBA less any amount relating to land.

Question 15

How many years does the SBA give tax relief for?

Answer 15

33 1/3 years

Question 16

When did the SBA rate change and what was the rate prior to the change?

Answer 16

The SBA rate changed from 6 April 2020 to 3% per annum, prior to that it was 2% per annum.

Question 17

If SBAs have been claimed prior to April 2020 over a 33 1/3 year period:

• What is the result of that?
• What might the trader be able to do? And when?
• What is the condition attached to what they might be able to do?

Answer 17

There will be a shortfall in allowances claimed due to the previous 2% rate.

A trader may be able to claim an additional allowance in the final chargeable period to make up for this shortfall.

But only if it is still owned by the person who owned it in April 2020.

Question 18

If an existing property which is already in qualifying use is renovated or converted can SBAs be claimed on that expenditure?

Answer 18

The expenditure is treated as new construction expenditure and will qualify for an SBA for 33 1/3 years from the date the expenditure is incurred.

Question 19

If the existing building which is being renovated or converted is not currently in qualifying use, when does the expenditure qualify for an SBA? x2

Answer 19

The expenditure will qualify for an SBA the later of:

• the date of the expenditure; and
• the date the building is brought into qualifying use

Question 20

What you cannot claim re: SBA? (more detailed) x9 (from HMRC WEBSITE)

Answer 20

You cannot claim on costs:

• for any residence or any structure located in the grounds of a residence
• which also qualify for plant and machinery allowances
• you’ve already used to claim another allowance
• for other items included in the price of the structure, such as land, integral features and fixtures
• for planning permission
• for financing, such as loans
• for public enquiries or legal expenses
• for landscaping or land reclamation
• for which you received a grant or contribution