HMRC have recently published guidance on the newly introduced Structures and Buildings Allowances.
Since the introduction of the Structures and Buildings Allowances (SBA) from 29 October 2018, taxpayers and advisers have been waiting for HMRC’s guidance to better understand how the legislation will be interpreted in practice. HMRC’s latest guidance is a good start, but a number of questions remain (HMRC have stated that further updates to the Capital Allowances Manual will follow). Businesses should be considering whether their current processes are sufficient to capture the information required to substantiate a claim, so they can benefit from this new tax relief.
To recap, SBA was introduced at Autumn Budget 2018 to provide tax relief for expenditure on structures and buildings which previously received no form of capital allowances (with the main exclusion from SBA being residential buildings). Relief is available for capital expenditure on both new buildings and extensions/refurbishments of existing premises, where all contracts for construction work were entered into on or after 29 October 2018.
The key learning points from the guidance are as follows:
There remain areas of uncertainty, particularly in relation to deciding whether a project is deemed to have commenced prior to 29 October 2018 by virtue of any ‘construction contract for the building’ being entered into prior to that date. Where this is the case, all construction costs for that project will be excluded from SBA. The legislation defines construction contracts as “any contract for works to be carried out in the course of construction of that particular building or structure”. It is not clear how this relatively broad definition will be applied by HMRC (for example whether this would include contracts for architect and design services, which on a typical construction project are incurred in advance of committing to build a property through appointment of a building contractor).
As noted above, there is differing treatment for used and unused buildings acquired from a developer. However, there is no definition of ‘use’ and whether, for example, a pre-let agreement being in place would deem the building to be ‘in use’.
HMRC have committed to updating the Capital Allowances Manual soon, which should help remove the uncertainty on the above points. If you have any questions please get in touch with the contacts to the left.
For further information please contact: