Capital allowances for structures and buildings

Simon Crookston, Partner, Corporate Tax

The government has announced that it wants to stimulate investment by businesses. This includes an increase in the Annual Investment Allowance (AIA) rate to £1 million for qualifying capital allowances expenditure and a new 2% structures and buildings allowance (SBA) for non-residential structures and buildings. A downside to the changes is that the capital allowance special rate allowance will reduce from 8% to 6% from April 2019.

What are the changes?

The AIA allowance applies to £1 million of qualifying plant and machinery expenditure in the two year period from 1 January 2019 to 31 December 2020. 

The SBA allowance applies to non-residential structures (land and dwellings will not be eligible for relief) and provides a flat rate 2% allowance based on the original expenditure, where all the contracts for the physical construction work are entered into on or after 29 October 2018. The relief applies from when the buildings is first brought into use. There are no balancing allowances or balancing charges in relation to SBA on a future disposal of the building.

The special rate reduction will apply to assets that qualify for the special rate pool, these will include integral features, long life assets and thermal insulation of buildings.

Who does this affect?

These rules will apply to all businesses with qualifying expenditure. If businesses are in the process of considering a capital plant and machinery expenditure programme then they may wish to delay this until 1 January 2019 so that they can obtain enhanced AIA relief from this date.

Contact us

Simon Crookston
Simon Crookston
Partner, Corporate Tax