Plant and machinery
In the 2018 Autumn Budget, the government announced an increase in the Annual Investment Allowance (AIA) for two years, from £200,000 to £1 million, in relation to qualifying expenditure incurred from 1 January 2019. Special rules apply to accounting periods which straddle this date.
Other changes made to plant and machinery capital allowances include:
- a reduction in the rate of writing down allowance (WDA) on the special rate pool of plant and machinery (including long-life assets, thermal insulation, integral features and expenditure on cars with CO2 emissions of more than 110 g/km) from 8% to 6% from April 2019. Special rules apply to accounting periods which straddle this date
- the end of the 100% first year allowance and first year tax credits for products on the Energy Technology List and Water Technology List from April 2020.
The Structures and Buildings Allowance
A new capital allowance, termed the Structures and Buildings Allowance (SBA), gives relief for expenditure on certain structures and buildings. The allowance is available for new structures and buildings intended for commercial use, and the improvement of existing structures and buildings, including the cost of converting or renovating existing premises to qualifying use.
Relief is limited to the original cost of construction or renovation, and given across a fixed 50-year period, at an annual flat rate of 2%, regardless of changes in ownership.
Only certain expenditure will qualify. The structures or buildings must be brought into use for qualifying activities. These include trades, professions or vocations, and certain UK or overseas properties businesses – essentially, commercial property lettings.
Relief will be given on eligible construction costs incurred on or after 29 October 2018. Where a contract for the physical construction work is entered into before this date, relief is not available.
Since the ending of the Industrial and Agricultural Buildings Allowances, no relief has been available for most structures and buildings. The new allowance addresses the gap, and is intended to encourage investment in construction for commercial activity. The detailed rules are still subject to consultation.