Who do the new tax relief rules apply to?
As always there are many details within the rules but in essence, tax relief applies to:
- qualifying costs incurred on
- qualifying non-residential structures and buildings
- used for a qualifying activity
WHO CAN CLAIM STRUCTURES AND BUILDINGS ALLOWANCE (SBA)?
Businesses can claim the SBA on the following expenditure:
- The costs of physically constructing the structure or building
- Demolition or land alteration costs necessary for the construction
- Direct costs required to bring the asset into existence
WHICH BUILDINGS AND STRUCTURES QUALIFY FOR SBA?
This relief rose to 3% per annum on 1 April 2020 (previously 2%) and whilst any increase in tax relief is a positive and the SBA can certainly provide cash flow advantages to businesses carrying out construction projects, the relief itself as currently drafted is not as generous as was originally thought, with an effective claw back on a future property sale. This means that it may or may not be worth claiming, depending on each companies circumstances.
The plant and machinery and integral features allowances are far more generous, particularly with the introduction of full expensing and the Annual Investment Allowance set at £1m indefinitely. Whilst it may appear that many costs of a construction project will not qualify for plant and machinery allowances, it is certainly worth investigating as the rules are detailed and may apply to more costs than expected.
With this in mind, we suggest that our clients speak to us before they undertake such a project to make sure they are claiming as many allowances as possible.