New Tax Relief For Commercial Structures Replaces Industrial Buildings Allowance

1. New Tax Relief For Commercial Structures Replaces Industrial Buildings Allowance As the UK continues to push businesses to expand and grow, they help push them further by offering incentives to keep the economy fluorescent and vibrant. After the second world war, the government introduced the Industrial Buildings Allowance where businesses could claim tax relief on their projects for up to 50 years after their initial construction. However, the Industrial Buildings Allowance was abolished in 2011 and was replaced with the Structures and Buildings Allowance (SBA). The new type of capital allowance tax break affects businesses incurring qualifying expenditure on non- residential structures and newly constructed buildings, or renovation projects, on or after 29 October 2018. In April this year, the Industrial Buildings Allowance rose from 2% to 3% for income and corporation tax. The increased rate of relief was designed to support businesses commercially or industrially constructing buildings. The allowance period is 33 years and one third after the initial construction was started. Businesses need to state when they started using the building and when the expenditure happened. The SBA still includes many of the projects that were previously covered by the Industrial Buildings Allowance, such as factories, bridges and tunnels, walls and warehouses. Other ways to claim tax relief includes most parts of the construction process such as design fees or if your business paid over the market value for a structure or its construction costs. You will only be able to claim for the original market value.

2. If you paid for the structure from someone else, you could claim tax allowance on their construction costs. The previous owner must provide you with a previous allowance statement so the government can see what qualifying expenditure there was in the sale. It is estimated that the annual cost of tax relief will amount to £295m by 2024-25. This is a huge amount of money that millions of businesses can take advantage of. The new SBA is different from the old Industrial Buildings Allowance system. Only specific categories of buildings qualify under this legislation whereas all commercial buildings qualify with SBA. There are, of course, areas where you cannot claim costs. These include residential buildings of any kind, plant machinery, planning permission, financing (such as loans), legal expenses, land reclamation, receiving grants or contributions and any integral features and fixtures, or other items, that were included in the price of the structure. Claiming your Structure and Buildings Allowance can prove difficult unless certain documentation is present for HMRC. You must have an allowance statement which proves information to identify the structure, such as address and description, the date of the earliest written contract for construction, the date that you started using the structure for a non-residential activity and the total qualifying costs. You’ll need to keep information about the earliest construction contracts in your records. Documentation like formal contracts, emails or board meeting notes will improve your chances of claiming tax relief. The legislation itself appears to be extremely complicated and HMRC has added to this confusion after releasing more than 90 pages of guidance. In simple terms, getting a HMRC Tax Specialist will save you thousands of pounds in tax, and legitimately too.