S&B allowance

Question 1

when can sba be claimed?

Answer 1

can be claimed on buildings or structures used in trade where CONSTRUCTION begins on or after 29th October 2018

first use is non-residential

includes: offices, retail premises, warehouses and factories

cannot be claimed on residential property (hotel or care home does not count as residential use)

Question 2

what rate is sba allowance?

Answer 2

flat rate of 3% straight line per annum (2% prior to 6/4/20)

full relief will be obtained over a 33 1/3 year period - always time apportion for pd

allowance starts from later of:
* date expenditure is incurred
* date first brought into business use

Question 3

sba disposal rules

Answer 3

there is no balancing adjustment

new purchaser continues to receive 3% for the remainder of the 33.3 years - therefore total relief will still be the original 33.3 years this doe not start again

purchase price is therefore irrelevant

time apportion if purchaser has a different pd of accs

Question 4

sba claim

Answer 4

sba allowance statement must be made by the person who incurred the construction expenditure

statement must include:
* date of contract for construction
* amount of qualifying expenditure
* date building/structure brought to use

if allowance statement is not made then then sba cannot be claimed by anyone

copy must be passed to any new owners

Question 5

sba prior to april 2020

Answer 5

time apportion 2% then 3% if acc period straddled april 2020

if sba was claimed before april 2020 then t end of 33.3 year period there will be a shortfall in allowance
if this is the case and it is the same owner as before april 2020 then the balance is claimed in the final chargeable pd

Question 6

what qualifies - new buildings and structures

Answer 6

capital exp incurred on construction - land not allowed

land preparation & demolition costs can be included

if building is purchased unused from a developer then split the land and building purchase price and use that as the qualifying amount

if building is purchase unused from someone not a developer then use the lower of:
* price paid for building (excluding land) or
* qualifying construction costs

Question 7

what qualifies - existing buildings and structures

Answer 7

if existing property (already in qualifying use and claiming sba) is renovated or converted then additional sba will be claimed (calculate separately)

if existing building is not already qualifying, the date at which the sba can be claimed for the renovation or extension is the later of:
* date of expenditure
* date brought to use

amount of expenditure and ate must be recorded on the allowance statement

Question 8

what happens if use of building changes

Answer 8

if building falls into disuse then sba can still be claimed

if building goes to residential use then sba cannot be claimed for period residential use occurs - if goes back to trade then can carry on claiming sba again if still in original 33.3 year period

if part business part residential then just and reasonable apportionment applies
* cannot claim if business use is incidental
* cannot claim for home office

Question 9

sba and leases

Answer 9

if the lease is for not more than 35 years then the lessor can claim sba not the lessee

if the lease exceeds 35 years AND the mv of the interest in the property retained by the lessor is less than 1/3 of the premium paid for the lease then the lessee can claim sba
in the case of a lease less than 50 years the amount of premium taken into account for this calculation is the same amount subject to cgt

in either case any qualifying expenditure incurred by the lessee can claim sba but no allowance available for unrelieved expenditure when lease comes to an end

Question 10

sba and vat

Answer 10

if the building is used to make taxable supplies then vat can be claimed and the sba is on the net

if building use changes then vat can be claimed or repaid as with p&m
the vat liability or asset is treated as increasing the qual exp from beginning of the chargeable period

Question 11

sba and cgt

Answer 11

consideration for disposal should be increased by total amount of sba claimed

therefore:
* a gain will be increased
* a loss will be reduced
in effect the sba has been clawed back and therefore main purpose for sba is cashflow benefit

if there is a ngnl disposal or a disposal that qualifies for incorporation relief then the sba must be carried over and added to the subsequent disposal

Question 12

sba and freeport tax sites

Answer 12

sba is claimed at a rate of 10% for 10 years

relief applies if:
* exp occurs AND construction begins AND brought to use by person claiming allowance at the time when the site is a freeport tax site
* expenditure incurred and building brought to first use on or before 30 sept 2026