HMRC have published a response to their consultation on the new Structures and Buildings allowance and in their final draft of the legislation and guidance have amended some of the original proposals.  

The new structures and buildings allowance  (SBA) is to be provided on eligible construction costs:

  • Incurred on or after 29 October 2018
  • At an annual rate of two percent on a straight-line basis
  • Once the property is brought into qualifying use.

Responses to the consultation and draft legislation and the government’s proposals to deal with them include:

  • A request that clarification of the meaning of residential use be included in the legislation.
    • The government have confirmed that this will be included within the guidance for the legislation but not within the legislation itself.
  • There was concern about the ability of claimants to provide sufficient evidence of eligible costs where the previous owners of property acquired overseas are not in the UK charge to tax.
    • To maintain equal treatment between overseas and UK investments, the Government does not propose any changes to the SBA legislation in respect of expenditure on overseas structures and buildings, but confirmed the requirements when purchasing property from an overseas seller will be included in the guidance to the legislation.
  • Respondents felt not allowing the SBA to be claimed on a disused property, but allowing it on a demolished building, would create an incentive to demolish a building instead of repairing it, and that the proposed period of 2 years for continuing to claim allowances on disuse was too short.
    • In response to this the government made amendments to the draft legislation to remove the temporary disuse provisions.
  • Other issues and concern were raised by respondents including the need to keep records of costs for 50 years, how to deal with large construction projects with multiple contracts and the length (7 years) of the pre-trading investment period for the relief.
    • The government has amended the draft legislation to remove the 7 year pre-trading restriction, allow evidence of expenditure incurred to be obtained from any previous owner of the structure or building and provide more flexible rules to reduce the administrative burden of calculating allowances on expenditure.

The final draft legislation has now been laid before Parliament with guidance on the new rules to be published alongside the final legislation in July 2019.

Links to our guides:

Structures and buildings allowances (SBA)

External link:

HMRC: Capital allowances for structure and buildings summary of responses
Final draft legislation

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