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Structures and Buildings Allowance: revised legislation and HMRC response

Structures and Buildings Allowance: revised legislation

HMRC have announced changes to the SBA legislation due to be finalised later this summer. Revised legislation has also been published.


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The Structures and Buildings Allowance (SBA) was announced on 29 October 2018 with immediate effect. On 17 June 2019 HMRC announced changes to the SBA legislation due to be finalised later this summer. This week’s announcements and publication of revised legislation confirm the SBA is on track. The changes are relatively minor and most of them appear to be helpful. Some areas of possible difficulty remain in which HMRC guidance will be critical.

This latest announcement includes a summary of responses to the draft legislation published in March 2019 and a revised draft of the legislation. HMRC will publish final legislation together with guidance later in the summer of 2019. Our previous commentary on the original draft legislation can be found here.

HMRC’s responses in the four main areas of the consultation are as follows:

  • No changes are proposed to the existing definition of ‘residential use’ (SBAs are not available for buildings in residential use) which is recognised to be wide. In fact the change to garden buildings (see below) arguably makes it wider. HMRC hope that the guidance in this area will be helpful;
  • A minor change is to be made to the treatment of expenditure by lessees. Where a lessee incurs expenditure qualifying for SBAs on leasehold improvements and the lease is under 50 years, at the end of the lease the remaining SBA balance will form the chargeable gains base cost for the lessee, rather than transferring to the landlord. How useful this is to a tenant is likely to depend on whether they are able to realise value from the improvements on the lease termination;
  • HMRC have amended the criteria for disuse. Temporary disuse will not affect SBAs, provided there is no residential use; and
  • No changes are proposed in relation to overseas aspects.

Other points and changes (some of which are reflected in the revised draft secondary legislation) include:

  • The administrative burden of calculating allowances on expenditure incurred after a building or structure has come into use is eased somewhat. Broadly there will be a choice to treat such capital expenditure as incurred on day one of the next accounting period;
  • Giving allowances where a structure or building is purchased from the Crown or other person not within the charge of UK tax; 
  • Modifying the rules for claiming allowances when a person makes a contribution to another person; 
  • Allowing evidence of expenditure incurred to be obtained from any previous owner of the structure or building; and
  • Assets used for purposes ancillary to residential use include those situated on land within the curtilage of a residential structure or building, such as an office in a garden.

There are some changes to the amendments to the chargeable gains rules which are needed to mesh in with HMRC’s thinking on SBAs. This includes preventing double taxation and double deductions and clarifying the rules on demolition. In addition, new rules have been introduced for capital contributions.

For further information please contact:

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