What is the difference between the Structures and Building Allowances and Capital Allowances?

Capital allowances (CA)

Capital allowances allow a commercial property owner to claim depreciation on items considered integral to a commercial property such as:

  • fire and security systems;
  • gas and electrical systems;
  • heating and cooling systems; and
  • sanitary equipment.

Commercial landlords are usually able to claim 20-30% of the purchase price of a property in allowances and is either claimed wholly in the first year if the property is a new purchase or on the basis of a reducing balance over a number of years if the property was purchased over two years ago.

It applies to all commercial properties, whether they have been converted from residential into commercial, or were originally built as commercial.

Structures and Building Allowance (SBA)

The Structures and Building Allowance applies to qualifying land and construction costs and is available to properties purchased or built after 29th of October 2018. Additionally, SBA can be claimed on any refurbishments undertaken on commercial property with respect to qualifying land and structural expenditure after 29th of October 2018.

Unlike capital allowances, this allowance also applies to any structure that is distinct from the earth surrounding it such as roads, bridges, walls, and asphalted sports grounds and car parks.

This form of tax relief is only applicable to buildings whose first use was commercial.

Relief is claimed at 3% of the qualifying expenditure over a period of 33.3 years. Once claimed this relief cannot be claimed on the property for another 50 years.

What are the differences between claiming SBAs and CAs?

The main difference between the SBA and CAs are their effect on Capital Gains Tax (CGT) once you sell the building. The SBA could potentially result in a higher CGT because you must add the total amount of the SBA you have claimed to your disposal receipts to calculate your capital gain or loss. Capital allowances have no effect on CGT.

You can claim both CAs and SBA on the same property. If you think your property may be eligible, get in touch today:

jess@cpatax.co.uk
0207 725 994