Changes to Capital Allowances in Updated Tax Statute

Feb 2019
Phillip Hammond, Chancellor of the Exchequer with his second pre-brexit tax statute draft outside no.10 Downing Street
Phillip Hammond, Chancellor of the Exchequer with his second budget

Whilst some anticipated moderate changes to the pre-Brexit budget, Chancellor Phillip Hammond didn’t fail to introduce a handful of new legislation to the updated tax statute.

With regards to our specialised area of capital allowances, there have been two changes to the main headline rates. In addition to this, new forms of relief have been introduced alongside clarification on existing primary fixtures legislation.

Annual Investment Allowance

A notable change in this area is the increase in Annual Investment Allowance (AIA) from £200k to £1m effective January 1st 2019. This is great news for anybody incurring new expenditure over the next two years, and makes getting your capital allowances organised for any new property acquisitions even more crucial.

This move in AIA was counter balanced by a permanent shift in the special rates pool, reducing allowances from 8% to 6% effective April 2019. This is said to align it with accounting depreciation policy.

Capital Allowances for Structures and Buildings

The new capital allowances for structures and buildings (SBA) will give a 2% straight line (over 50 years) for capital allowances on the building work elements of a building. This will be available for all non-residential structures on contracts that are entered into from October 2018 on-wards.

This will not, however, be available on land. As a result of this, second-hand buildings will require an apportionment between these components.

Capital Allowances for Fixtures

It has been made clear that relief will still be available on fixtures as it is now. The chancellors draft also suggests that fixtures must be excluded from the claim for the 2% SBA. Whilst this is great news and gives a much pushed for relief on construction costs, expert advice to arrive at the correct and most beneficial outcome is still going to be crucial.

What can STax do to help?

Here at STax we provide expert property tax advice from our specialised team of tax advisers, accountants and chartered surveyors. If you or one of your clients own commercial properties, multi-unit residential buildings or furnished holiday lets – you can contact us for a free client review here.