Capital Allowances: Structures and Buildings Allowance
Published 18 June 2019
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Who is likely to be affected?
Businesses incurring qualifying expenditure on new structures and buildings on or after 29 October 2018.
General description of the measure
Section 30 of Finance Act 2019 provides for introduction of a new Structures and Buildings Allowance (SBA), available from 29 October 2018 on qualifying costs for new non-residential structures and buildings. The rate of SBA will be at two percent on a straight-line basis.
A technical note was published at Budget 2018. Detailed provision in draft legislation will be laid before Parliament in June 2019.
Policy objective
The SBA aims to relieve the construction costs for new structures and buildings used for qualifying purposes over their lifetime. This will support business investment in constructing new structures and buildings including necessary preparatory costs, and the improvement of existing ones, as well as improving the international competitiveness of the UK’s capital allowances system.
Background to the measure
The Government announced at Budget 2018 that it will introduce a new Structures and Buildings Allowance, available on expenditure from Budget Day (29 October 2018). HMRC published a technical note alongside the announcement.
Detailed proposal
Operative date
The measure will have effect for qualifying expenditure where the first contract for construction of the relevant structure or building was entered into on or after 29 October 2018.
Current law
The Capital Allowances Act 2001 (CAA01) sets out the capital allowances available on business assets. None are currently available for expenditure on most structures and buildings.
Proposed revisions
Finance Act 2019 provides for introduction of the SBA and contains powers to give effect to provisions through statutory instrument. The technical note outlines key aspects of the relief.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| -55 | -165 | -260 | -365 | -475 | -585 |
These figures are set out in Table 2.1 of Budget 2018 and have been certified by the Office for Budget Responsibility. More details can be found in the policy costings document published alongside Budget 2018.
Economic impact
This measure will have a positive impact on business investment.
Impact on individuals, households and families
The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that this measure will have any impacts for those in groups with protected characteristics. Impact on business including civil society organisations
This measure will help to stimulate business investment in the UK economy by providing an incentive for businesses to invest in non-residential structures and buildings. Businesses will need to assess their capital allowance entitlement for non-residential structures and buildings, and to claim it as a deduction in computing their taxable profits.
Since Budget 2018, HMRC has attempted to gather further information on the number of those likely to claim the SBA. As a new capital allowance based on assets outside the existing regime, HMRC does not have data upon which to accurately estimate the number of potential claimants.
There is also a lack of external data which may be used to accurately estimate such a number. However, the SBA allows previously unavailable tax relief for costs that should already be reflected in businesses’ accounts.
Impact on business including civil society organisations
This measure is expected to have no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
Necessary changes to HMRC systems to accommodate the change for businesses, with operational costs estimated at £17.7 million, including for the Valuation Office Agency.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, please contact Behroz Rustumji on Telephone: 03000 585921 or email: contact.capitalallowances@hmrc.gsi.gov.uk.