In Philip Hammond’s second Autumn Budget (29 October 2018), there were plenty of changes to capital allowances, as noted below. 


Annual Investment Allowance (AIA)


  • The 100% AIA has been £200,000 since 1 January 2016.

  • The AIA will increase to £1m, the highest it has ever been, for two years from 1 January 2019.

    • As a reminder, the AIA allows a 100% deduction for qualifying plant and machinery expenditure upto the AIA limit incurred in a company or group of companies.

    • Above the AIA, the usual capital allowances writing down allowances apply.


Special Rate Pool (SRP)


  • The Special Rate Pool (SRP) writing down allowance will fall from 8% to 6% from 1 April 2019 (Corporation Tax) and 5 April 2019 (Income Tax).

  • In relation to buildings, the SRP includes integral features, thermal insulation and long life assets.


Enhanced Capital Allowances (ECA)


  • The 100% first year allowance and first year tax credit will end in April 2020.

  • The list of designated energy-saving technologies qualifying for an ECA will be updated for 2019 and 2020.


Structures and Buildings Allowance (SBA)


The SBA addresses the lack of tax relief for ineligible expenditure for most new build projects and was suggested in the OTS review only a few months ago. 


It sounds a bit like IBA but it is not ...


  • The Structures and Buildings Allowance (SBA) introduces a new flat rate 2% allowance for new non-residential structures and buildings.

  • SBA will be effective from 29 October 2018 and based on the original cost of construction or renovation.

  • SBA will be available:

    • When a structure or building first comes into use.

    • On various assets including offices, retail and wholesale premises, hotels, nursing homes, factories, warehouses, wall, bridges and tunnels.

    • For oversea structures or buildings to the extent the profits of the qualifying activity are chargeable to tax in the UK.

  • SBA will not apply to:

    • Acquiring land including the cost of planning permission.

    • Dwellings, including university or school accommodation, military accommodation and prisons.

      • Communal areas of a dwelling (e.g. corridors in a block of flats) will also be excluded, unlike ordinary capital allowances.

      • The definition of dwelling will be subject to consultation.

    • Contracts for physical construction works that started before 29 October 2018.

      • For speculative building or ‘in house’ construction, relief will not be available where construction activity began before 29 October 2018.

  • It would appear that items qualifying for plant and machinery allowances will not qualify for SBA.

  • Where a property is acquired from a developer, an apportionment will be required to separate the land cost.

  • The previous complications of the IBA regime at the point of disposal have been recognised – future owners will continue to claim the flat rate 2% if they have a qualifying activity.

  • Assets qualifying for SBA will not be entitled to the AIA.

  • If the SBA is not claimed, it will be lost and not carried forward to a later period.

  • For chargeable gains, a person's allowable cost will be reduced by the total SBA claimed.

  • There will be provisions for change of use to a dwelling, temporary disuse, disposals of long leases and anti-avoidance.


Electric Charging Points – 100% allowance


  • This 100% capital allowances for expenditure incurred on charging points for electric vehicles, will be extended to 31 March 2023 (Corporation Tax) and 5 April 2023 (Income Tax). 

  • This was originally planned to end in April 2019.


Alterations to Land for the Purposes only of Installing Plant or Machinery


  • The definition of the above is clarified, only to allow for costs necessary for installing plant or machinery eligible for capital allowances.

  • This is effective from 29 October 2018.

  • This is almost certainly a reaction to the recent tax tribunal decision in SSE Generation Ltd (TC06618).

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