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New Structures and Buildings Allowance guidance added to HMRC Manual

New Structures and Buildings Allowance guidance

On 1 November 2019, HMRC published their guidance on Structures and Buildings Allowance within their online Capital Allowances Manual.

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Harinder Soor

Partner – Claims and Incentives

KPMG in the UK

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Since the introduction of the Structures and Buildings Allowance (SBA) from 29 October 2018, announced in the Autumn Budget 2018, advisers have been waiting for HMRC’s guidance to better understand how the legislation will be interpreted in practice. Whilst this additional guidance goes some way to addressing certain points raised during the initial consultation phase, other areas of uncertainty remain unanswered.

SBA provides tax relief for expenditure on structures and buildings (the main exclusion being residential buildings). Relief is available for capital expenditure on new buildings and extensions/refurbishments of existing premises, where all contracts for construction work were entered into on or after 29 October 2018 and the works commenced after that date.

The key learning points from the latest guidance are:

  • Commencement provisions
    • SBA is only available in relation to qualifying building projects deemed to have commenced on or after 29 October 2018. A project will be deemed as commencing prior to this date where any contract for the physical construction works has been entered into before 29 October 2018, regardless of whether the works had commenced at that point. HMRC‘s opinion is that an email exchange confirming works will take place may be sufficient to establish the existence of a contract;
    • Where no contract exists (e.g. where works are carried out ‘in house’ by a development company) commencement of construction will be the date the physical works commence; and
    • Uncertainty remains regarding the extent to which on-site demolition works prior to 29 October 2018 will prevent entitlement to claim SBA on buildings separately contracted and commenced after that date.
  • Allowance statement requirements
    • An allowance statement must be created and submitted to HMRC alongside any initial SBA claims made in a tax return. Whilst HMRC appear open to receiving summary disclosures rather than detailed analysis, this statement must include information to identify the building, date of the earliest written contract for the relevant construction project, amount of SBA qualifying expenditure incurred and the date the building is first brought into non-residential use;
    •  Where there is a disposal of SBA qualifying buildings, allowance statements must be passed to the purchaser for their submission to HMRC in support of subsequent claims; and
    • Where the person who incurred the initial qualifying SBA expenditure is not within the charge to UK tax (e.g. The Crown or other exempt entity) they will be required to create an allowance statement for subsequent owners within the charge to tax. With certain exceptions where property is acquired unused from developers, HMRC will not accept estimated SBA claims by subsequent owners.
  • Definition of care homes
    • There is a narrow definition of ‘care homes’ within the manual. Only care home accommodation which provides personal care where the persons occupying are in need of such services qualifies for SBA.
  • Issues in filing SBA claims within tax returns
    • HMRC have advised that the Corporation Tax online service will not be updated to support SBA until April 2020 and have advised of a work around in the meantime.

If you have any questions, please get in touch with:

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