Is the Structures and Buildings Allowance the New Industrial Buildings Allowance?

Is the Structures and Buildings Allowance the New Industrial Buildings Allowance?

The Industrial Buildings Allowance was introduced by the government as part of its 1945 Income Tax Act to boost post-war productivity in industry. The idea behind the scheme was that, whatever the capital cost of constructing a manufacturing or processing building, whoever oversaw the building would be given tax relief. The Industrial Buildings Allowance was originally aimed at the productive industry, but it was expanded to include allowances on infrastructure, such as tunnels, bridges, roads, and even hotels and commercial properties. The Industrial Buildings Allowance allowed relevant entrepreneurs to pay less tax, usually for twenty-five years. Thus, the allowance provided an incentive to build industries that would boost the economy in a post-war society.

The Industrial Buildings Allowance no longer exists, having come to a phased withdrawal that ended in the financial year beginning 1st April 2011. However, businesses can still claim tax relief based on this building work, such as the Structures and Buildings Allowance, which was introduced by the government in 2018.

Structures and Buildings Allowance vs. Industrial Buildings Allowance The Structures and Buildings Allowance gives a business a 2% flat rate relief over fifty years for building work on most non-residential buildings, such as factories, warehouses, and infrastructure, such as tunnels, walls, and bridges.

Initially, the Structures and Buildings Allowance seems to be an updated version of the Industrial Buildings Allowance. However, there is a main difference in how the tax claim works when the building is sold. Industrial Buildings Allowances had worked on the idea that, if a building was sold within its twenty-five-year claim, all of the allowances that had been claimed by the seller would be passed to the buyer to be written off over however many years remained of its claim. However, the Structure and Buildings Allowance works differently, as the buyer simply inherits the tax written-down value that remained.

Also, the Structure and Buildings Allowance does not have a fixed timescale. While the Industrial Buildings Allowance was set for twenty-five years, the government is lending the business tax relief until the asset is sold for profit under the new Structure and Buildings Allowance.

Are You Eligible to Make A Claim?

To claim a Structure and Buildings Allowance, there are three main conditions that you must satisfy.

1. The Building Must Be in Qualifying Use This means that the building you wish to claim tax for must be used for a qualifying trade, such as a hotel, sports pavilion, or is in use as a commercial building.

2. The Expenditure Must Be Qualifying Expenditure The qualifying expenditure on a building is the capital expenditure earned by either the person who constructs the building or by whoever has bought the building unused from a property developer.

3. You Must Hold the Relevant Interest in the Building If you have constructed the building or own it, then you are the person who holds relevant interest. If the structure is sold after the tax is claimed, then the new owner can claim tax allowances under the Structure and Buildings Allowance.

If you would like to find out more about being eligible for claiming a Structure and Buildings Allowance, our specialists at Areande will be happy to offer advice and a guiding hand.