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Structures and buildings capital allowances

Newsletter issue - March 2020.

One of the key messages regarding claims for structures and buildings capital allowances (SBAs) is that record keeping and cost segregation will be of paramount importance. In order to claim the allowance, evidence of qualifying expenditure must be produced in the form of an allowance statement, submitted to HMRC. Records can include things like formal contracts, emails or board meeting notes.

Broadly, SBAs may be claimed for qualifying capital expenditure on construction works incurred on or after 29 October 2018. SBA expenditure does not, however, qualify for the capital allowances annual investment allowance (AIA).

The main features of the SBA are summarised as follows:

The structure must be used for a qualifying activity, which is taxable in the UK. Qualifying activities are:

The sale of the asset does not result in a balancing adjustment (the purchaser takes over the remainder of the allowances written down over the remainder of the 50-year period).

Claiming SBAs

It is only possible to make a claim from when a structure or building first comes into use.

Broadly, the claimant will need an allowance statement for the structure. Where the claimant is the first person to use the structure, a written allowance statement must be created before making the claim. The allowance statement must include:

Where a used structure is being purchased, the claimant can only claim SBA if they obtain a copy of the allowance statement from a previous owner.

For any extensions or renovations that were completed after the structure was first used, the claimant can record separate construction costs on the allowance statement or create a new allowance statement.

Claims are generally made via the self-assessment tax return.