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Structures and Buildings Allowance draft legislation published

Structures and Buildings Allowance

Draft secondary legislation on the new Structures and Buildings Allowance published for comment.

Harinder Soor

Partner – Claims and Incentives

KPMG in the UK


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Draft legislation has been published in respect of the new Structures and Buildings Allowance, announced as part of Autumn Budget 2018. The drafting broadly mirrors the key features of the allowance detailed in HMRC’s technical note published as part of the Budget, however certain key changes have been made in response to the recent consultation with stakeholders. HMRC now invite further comment on the draft legislation before it is finalised in the form of a Statutory Instrument (from powers included in Finance Act 2019). Eligible taxpayers should be able to benefit from this relief in respect of qualifying expenditure incurred from 29 October 2018 onwards, so could potentially affect tax returns currently being prepared.

The draft legislation is extensive, and while it provides clarity on some matters that were uncertain based on the Structures and Buildings Allowance (SBA) technical note issued at the Budget, there are a number of points which remain unclear. Key technical elements of the draft legislation are:

  • Tax relief available – The allowance will be available at 2 percent per annum (straight line basis) in respect of new commercial structures and buildings or renovations, from the date of first use. Importantly, any SBA claimed will proportionally increase the capital gain on disposal of the asset in question;
  • Commencement – Rules surrounding the relevant contract (or connected contracts) determine if a project is deemed to start after the 29 October 2018 commencement date and therefore eligible for relief;
  • Restrictions – HMRC have sought to clarify the instances where expenditure on land or ‘residential use’ property would be ineligible for the relief. While it is clear certain asset classes will be excluded (e.g. student accommodation), the legislation is not comprehensive which may result in uncertainty for certain taxpayers;
  • Interaction with other tax reliefs – if expenditure qualifies for another tax relief (e.g. plant and machinery allowances) the expenditure will, on the whole, be ineligible for SBA;
  • Transfers of second hand assets – There are many permutations of how a purchaser will quantify the available SBA depending on whether the asset has been brought into use and the tax status of the prior owner(s), with many transactions requiring the vendor to make an ‘allowances statement’ in order for the purchaser to benefit from any SBA going forward; and
  • Leasing complexities – Where a new lease with a term of 35 years or greater is granted and a capital sum is received in consideration, calculations must be performed to confirm whether the lessor or lessee is the beneficiary of any SBA available. For leases with a term under 35 years, any SBA would be retained by the lessor.

It is important to state that the draft legislation is subject to a second round of stakeholder consultation, closing on 24 April 2019. Accordingly, while significant detail is available, this is subject to change depending on the consultation outcome. HMRC expect to issue a consultation response in May 2019 and final legislation later in the year.

Noting that there could be subsequent changes to the drafting, we consider the key impacts of the legislation to be as follows:

  • General impact – Taxable investors, owner occupiers, property developers and tax-exempt entities (incl. pension funds, public sector entities, charities) will all be impacted by this legislation in different ways. This may include retaining construction cost records for a future disposal, performing a detailed SBA analysis or completing an accurate ‘allowances statement’ on disposing of an asset. All taxpayers should ensure they are aware of how the rules affect them to claim the relief where possible and reduce the risk of losing value when disposing of qualifying assets;
  • Opportunity to benefit from additional tax relief – Amongst the legislative detail, it should not be forgotten this is a valuable tax relief to qualifying taxpayers who would previously have received no tax relief on such expenditure. As for plant and machinery allowance claims, seeking specialist capital allowances advice on projects qualifying for SBA can help ensure compliance with the legislation and identification of all SBA qualifying expenditure; and
  • Increased administration burden / record keeping – The draft legislation is clear that in instances where relevant asset transactions or development projects take place and appropriate documentation is not retained, claims by current and future owners would be restricted to £nil. To prevent a loss of value during a taxpayer’s hold period or on disposal, full and complete records of SBA qualifying projects should be retained. This requirement will be particularly onerous for taxpayers with multiple qualifying acquisitions / developments.
Those taxpayers who might benefit from SBA in a tax return which is currently being prepared (e.g. 31 December 2018 year ends), will have to wait until the legislation is final. Affected taxpayers should therefore stay up to date with any changes arising from the consultation. Get in touch with us should you wish to discuss your position in preparation for the first UK tax returns to be submitted including SBA claims, or these developments in further detail. Direct responses to the consultation can be sent to The consultation closes at 11:45pm on 24 April 2019.

For further information please contact:

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