Where contracts are entered into after 29 October 2018 for construction projects on non-residential properties, taxpayers can now potentially benefit from a claim for Structures & Building Allowances (“SBA’s”) on these costs. The claim is made at a rate of 2% per annum (on a straight-line basis) and can be made if a qualifying activity is being carried out.
These allowances will reduce the tax burden on the business. Where a property is rented out and the relief is still available, claims can potentially be made by both a lessor and a lessee concerning the costs they each incur on the property. A claim can only be made for SBA’s once the property has been brought into use for a qualifying purpose.
The detailed building costs and supporting documentation will require to be reviewed to ensure that expenditure on which SBA is claimed excludes items such as land, planning permission and financing costs. Additionally, expenditure that will qualify for tax relief at a higher annual rate such as 6%, 18% or 100% per annum should be identified and excluded from amounts qualifying for SBA’s.
There are a number of factors that need to be considered to ensure that a valid claim can be made. If you would like to discuss a Construction project to establish if it will qualify for SBA’s or would like more information, please contact Lesley Connon, Corporate Tax Senior Manager (firstname.lastname@example.org) or your usual AAB contact.
By Lesley Connon, Corporate Tax Senior Manager.
For more information on Lesley and the Corporate Tax team, click here.