Structural and buildings allowance ('SBA')

On 29th October 2018 the Government announced the introduction of the SBA for all new projects starting on or after this date. The SBA is an annual allowance is calculated on the cost of the buildings and given at a rate of 2% on the straight line basis over 50 years.

In practice this means the cost of the land will have to be extracted from the new build cost before an SBA can be claimed. In addition, the cost of the fixtures will also need to be identified in order to accelerate the cash flow benefit of the capital allowances claim.

Eg. Acom has a year end of 31st December and builds a new head office a cost of £5m from 1st March 2019 to 1st January 2020. The land cost was £1m, the fixtures were £1m and the remaining build cost was £3m. The capital allowances claim in the year ending 31st December 2020 is £1,060,000 being £1m AIA on the fixtures and £60,000 SBA (£3m/50).

Annual investment allowance ('AIA')
The AIA is generally aimed at small to medium sized businesses and investors and enables Capital Allowances of 100% to be claimed on most types of purchases of plant or machinery, excluding cars.
In recent years HMRC has tinkered with the AIA and up to December 2015, maximum rates have varied between £25,000 and £500,000. From 1 January 2016 the Chancellor announced the AIA had been reduced to a permanent figure of £200,000.

From 1 January 2019 there has been a temporary increase in the AIA to £1,000,000 which will continue until 31 December 2020. For entities with a 31 December year end the AIA calculation will be straight forward but anti-avoidance measures have been introducted to companies with other year ends to ensure the correct amount of AIA is given during the 2 year period.  

This generous relief will now enable most businesses to claim Capital Allowances on the whole of their capital expenditure on plant or machinery in the year of purchase.
Eg. a partnership making a net profit of £1.5m in the year ending 31 December 2019 purchases a new head office for £4m and following a specialist survey it is established £1m qualifies for Capital Allowances. The whole of the £1m can be claimed against profits in the year ending 31 December 2019 reducing the overall tax bill from £675,000 to £225,000.