Budget Changes Encourage Investment 7th December 2018 A number of measures contained in October’s budget were designed to increase investment made by UK businesses and aimed at raising the UK’s international competitiveness. Farmers anticipating expenditure on new commercial buildings or a large outlay on machinery, may find Chancellor Hammond’s changes both interesting and useful. Let’s look first at the Structures and Buildings Allowance. Both the Industrial Buildings Allowance and Agricultural Buildings Allowance were abolished in 2011. So, for the last 7-years the UK has not had any relief for building commercial structures. The budget two months ago introduced a new Structures and Buildings Allowance (SBA) for new non-residential structures. This relief is designed to encourage investment in the construction of new structures and buildings and the improvement of existing ones. The relief will be given at a flat rate of two percent over a 50-year period and will be available on all commercial structures including offices, retail and wholesale premises, walls, bridges, tunnels, factories and warehouses. Capital expenditure on renovations or conversions of existing commercial structures or buildings will also qualify for the relief which will apply to both businesses chargeable to Income Tax and companies chargeable to Corporation Tax. Although SBA expenditure will not qualify for Annual Investment Allowances (AIA) it will continue to be possible to claim on integral features and fittings of a structure as expenditure on which capital allowances are available at a higher rate including AIAs. These can give 100% relief for such costs in the first year. Therefore, it will be important to obtain from the contractors completing the project, an accurate split of costs between the building work and the fixtures where immediate tax relief for part of the construction outlay would be beneficial. Relief is only available where all the contracts for the physical construction works were entered into on or after October 29, 2018. It can include the costs of any demolition and land alterations necessary for construction. Claims an only be made when the building first comes into use. If the building is subsequently sold, this will not result in a balancing adjustment, instead the purchaser takes over the remainder the 50-year period. Turning to the Annual Investment Allowance which will run alongside this new relief. The AIA is to be increased to £1 million for two years from January 1 2019, aiming to increase investment in new plant and machinery. If at all possible, it may be worth delaying purchases of expensive plant and machinery until after this date to take advantage of this increased relief.