Structures & Building Allowances – A guide for Intermediaries

In October 2018, the government introduced a new capital allowance known as the Structures and Buildings Allowance. This allowance is significant for intermediaries and their clients as it gives tax relief for businesses who invest in newly built or renovated commercial structures and buildings. This allowance compliments but does not replace “fixtures” claims as the relief applies to the element not covered by those claims.

The Allowance
The fixed rate of relief is 2% a year however this can be applied to numerous areas ranging from: new builds, renovations of, or conversions to commercial property where the contract for construction was entered into on or after 29 October 2018, to freehold; or lease of >35 years with relevant capital sum/premium of over 66% of property value.

The real question that needs to be answered is: What do you need to do to help your clients; the answer is to ask the right questions to them. Unlike “fixtures” claims there is no Section 198 election or negotiating position for the parties to consider. The vendor’s entitlement to SBA stops on the sale of the asset so the buyer acquires the unused amount of the vendor’s SBA claim.

There is an information requirement on transactions to pass on an SBA claim to the buyer. However guidance from HMRC and the Solicitor’s Regulation Authority (SRA) is very limited at present and the Commercial Property Standard Enquiries (CPSE) form has only just been updated by the SRA at ‘Question 32.10’.

Requirements
It is important to note the requirements for certain circumstances for example;

1.Where the transfer is between parties where the vendor has already claimed SBA:

  • An “Allowance Statement” is required which should include:

-Address of the Property
-Date of earliest written contract for construction
-Amount of qualifying expenditure on construction or purchase
-Date of first non-residential use
-Amount of unused allowances at date of transfer

2.Where the acquisition is direct from the developer:

  • Apportion the price paid by the buyer between the non qualifying land and the qualifying building
  • To be based on a reasonable current market value apportionment between land and building

You can add value to your client relationship by flagging this and awareness will reduce the risk to your own practice of failing to advise. Garbutt + Elliott has a team of property allowance and tax experts who are willing to help. As always, in the world of tax, the rules are complex and this blog provides only a broad overview, for more information contact Rob Durrant-Walker at rdwalker@garbutt-elliott.co.uk for any assistance on these matters.