Since the government abolished the agricultural buildings allowance in 2011, there has been little if any tax relief available on the construction of new fam buildings…until now!
A new structures and buildings allowance (SBA) was announced at the recent budget, which should allow businesses that have an interest in the underlying land to offset 2% of the building costs incurred against their taxable profits each year evenly over a total of 50 years. Certain details are still subject to consultation however, based on initial guidance in the technical note released on Budget Day, the relief should be available for eligible expenditure incurred where all contracts were entered into on or after 29 October 2018.
The main details of the new relief are as follows:
- relief will be given at a 2% flat rate over a 50-year period;
- relief will be available for new commercial structures and buildings, including costs for new conversions or renovations;
- relief will be available for UK and overseas structures and buildings, where the business is within the charge to UK tax;
- relief will be limited to the costs of physically constructing the structure or building, including costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence;
- relief will be available for eligible expenditure incurred where all the contracts for the physical construction works were entered into on or after 29 October 2018;
- it will only be possible to make claims from when a structure or building first comes into use;
- relief will not be available for land costs or rights over land;
- relief will not be available for costs of obtaining planning permission;
- the claimant must have an interest in the land on which the structure or building is constructed;
- relief will not be available for dwelling houses, nor any part of a building used as a dwelling where the remainder of the building is commercial;
- the sale of the asset will not result in a balancing adjustment (the purchaser will take over the remainder of the allowances written down over the remainder of the 50-year period);
- expenditure on integral features and fittings of a structure or building that are currently allowable as expenditure on plant and machinery, will continue to qualify for writing down allowances for plant and machinery including the annual investment allowance (AIA), up to its annual limit;
- SBA expenditure will not qualify for the AIA;
- where a structure or building is renovated or converted so that it becomes a qualifying asset, the expenditure will qualify for a separate 2% relief over the next 50 years.
If you require any further information regarding the contents of this article, please do not hesitate to contact a member of our agricultural team.