Hot Topics News Hot Topics Reviewing the changes to capital allowances In the 2018 Autumn Budget, Chancellor Philip Hammond announced a handful of changes to capital allowances, including the introduction of a new allowance, termed the Structures and Buildings Allowance (SBA). Here, we take a look at these changes in more detail.Alterations to the Annual Investment AllowanceThe majority of firms are able to claim a 100% Annual Investment Allowance (AIA) on the first portion of expenditure on most types of plant and machinery (excluding cars). The AIA applies to businesses of any size, and most business structures. However, provisions are in place to prevent multiple claims.In the Budget, the Chancellor announced a temporary increase in the AIA, from £200,000 to £1 million. This applies to expenditure incurred from 1 January 2019 to 31 December 2020. Complex calculations may apply for businesses whose accounting periods straddle this period. Therefore, in order to make full use of the increase, firms should ensure they time the purchase of plant and machinery carefully.The new Structures and Buildings AllowanceThe SBA provides relief for expenditure on certain new, non-residential structures and buildings. Eligible construction costs incurred on or after 29 October 2018 will qualify for relief: this will be at an annual rate of 2%, on a straight-line basis. However, if a contract was entered into before this time, relief is not available.New structures and buildings intended for commercial use are eligible for the SBA, alongside the costs associated with making improvements to existing premises.Businesses chargeable to income tax and companies chargeable to corporation tax are able to claim the relief. The relief will be available from the date the structure or building is brought into use for the first time for a qualifying activity. Where the business is within the charge to UK tax, overseas structures and buildings are eligible for the SBA.Qualifying activities and exclusionsIt is important to note that only certain expenditure is eligible for the SBA. Structures and buildings must be brought into use for qualifying commercial activities. Types of structures and buildings covered include factories and warehouses; offices; hotels and care homes; walls; and retail and wholesale premises. However, the final list is yet to be clarified.Under the initiative, certain exclusions apply: expenditure on land, residential property or other buildings functioning as dwellings is not eligible for the relief. Home offices are also not eligible. Where a structure or building has mixed use, such as between residential and commercial units, relief is apportioned.Considering other changesIn the 2018 Autumn Budget, the Chancellor also announced a reduction in the rate of writing down allowance (WDA) on the special rate pool of plant and machinery. This is set to reduce from 8% to 6% from April 2019.We can advise on all aspects of capital allowances – please contact us for more information.