A QUICK LOOK AT…

AIA is publishing a series of articles designed to take a quick look at key topics in accountancy, management and finance. Bookmark this page to update your knowledge when you can grab a spare five minutes. If you would like to suggest subjects for future articles, please contact us.

A QUICK LOOK AT... RECENT CHANGES TO CAPITAL ALLOWANCES - AN OVERVIEW

There have been several changes recently, the main ones being highlighted below.

A new Structures and Buildings Allowance (SBA) has been introduced. The allowance applies to construction expenditure on new non-residential structures and buildings, incurred on or after 29October 2018. The allowance is at 2% a year on a straight-line basis for 50 years.

Qualifying expenditure includes:

  • fees for design
  • preparing the site for construction
  • construction works
  • renovation, repair and conversion costs
  • fitting out works

The allowance cannot be claimed for the cost of the land, integral features and fixtures or costs which also qualify for plant and machinery allowances.

A written allowance statement must be made before making a claim.

On disposal - balancing adjustments do not arise on disposal. Instead, the new buyer takes over the remaining balance and continues to write down at 2% for the remainder of the original 50-year period. However, the amount of the SBA claim may increase any capital gain on the sale because it will be added to the disposal proceeds. A copy of the allowance statement must be given to the new owner when the building is sold.

The Annual Investment Allowance (AIA) has seen several changes since its introduction in 2008. Set at £200,000 from 1 January 2015 to 31 December 2018, there is now a temporary increase to £1,000,000 for two years from 1 January 2019 to 31 December 2020 when it is expected to revert back to £200,000.

Whilst the writing down allowance (WDA) for plant and machinery remains at 18%, the rate for the special rate pool falls from 8% to 6% from April 2019.

Changes to First Year Allowances (FYA):  The Enhanced Capital Allowance (ECA) is due to be phased out by April 2020. The 100% FYA applies to expenditure on energy saving and environmentally beneficial assets.

However, the 100% FYA for Electric Vehicles Charge-Points is to be extended to 31 March 2023 for corporation tax purposes and to 5 April 2023 for income tax purposes. The allowance is for expenditure on new and unused electric charge-points.