CA94570 | Structures and buildings allowance (SBA): additional VAT: additional VAT liabilities

CAA01/S270GB

A person who has the relevant interest and first makes use of a building may incur an additional VAT liability in respect of their qualifying expenditure. The additional VAT is treated as further qualifying expenditure on the building. The additional VAT liability is added to the qualifying expenditure at the beginning of the chargeable period in which the additional VAT liability accrues. The annual allowance will be 2% per year of the increased qualifying expenditure for the remaining period ending up to 33 1/3 years from the date the building was first brought into use.

Any difference between the total SBA entitlement in respect of the additional VAT liability and the amount of that additional liability is adjusted for in the last year a claim can be made, provided the person still holds the relevant interest.

Example

Terry constructs a workshop for £250,000 plus £50,000 VAT which he reclaims in full. He brings it into use immediately and claims SBA. The annual SBA is £250,000 × 3% = £7,500. During year six he changes the use of the workshop and incurs an additional VAT liability of £2,500 in respect of the original qualifying expenditure incurred on construction of the workshop. His SBA then becomes (£250,000 + £2,500) × 3% = £7,575. In year 33 1/3 he can claim an additional £375 allowance for that year being the difference between the £2,500 additional VAT liability and the allowance already received in respect of this, which is £2,125 (£2,500 × 3% × 28.33).