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Hi,
I had a question regarding SBAs. In Part 2 of the lecture (timestamp: 9:48 ) SBAs was mentioned where it was said that we would start from 320,000 if it qualified for SBAs.
In the Capital Allowances chapter, allowances will be added back to SBAs when we dispose of the asset.
I kind of got confused, why we take 320,000?
Is it because it’s a new asset which costed us 320,000. And we added back the rollover relief just like we add back our allowances in SBAs before selling them?Thank you.
I also wanted to ask if only those buildings qualify for SBA allowance that are under construction or development but not the old or already used ones.
Thank you.
I assume you’re referring to Example 4 in Chapter 14?
The point is, that when rollover relief is being claimed, the reduced base COST is for CGT purposes only when the asset is eventually sold (so that the gain will be higher). If the asset also qualifies for SBAs, SBAs would be claimed on the full qualifying cost for SBAs, not the base cost.
So if the full cost of the building in question qualified for SBAs, and it was used in the trade for 48 months exactly, SBAs claimed over the 4 years would be 3% x £320,000 x 4 = £38,400 which would be ADDED to the proceeds of SALE for the purposes of calculating the gain when it’s sold, and the cost to deduct would be the CGT base cost as calculated above. So both the SBAs being clawed back (which increases the proceeds) and the rollover relief claim (which reduces the cost) would result in the eventual gain being higher.
SBAs is only for buildings where the contract for the build (or the purchase unused from a builder) was entered into on or after 29 October 2018, so older buildings would not qualify (although if they are extensively renovated/extended etc and the contract for the renovation/extension was entered into on or after 29 October 2018, then the cost of the renovation/extension would qualify but not the original cost).
Thank you for replying. This has cleared my doubt.
Yes that’s correct. I was referring to Example 4.
Also I wanted to ask if the dates (apart from election date and CGT repayment date etc) are important to remember? For eg. 22nd of every month to pay taxes, under investor’s relief 17th March 2016, since there are so many dates to remember, it feels cumbersome.
Thank you so much once again.
The dates are important because, in the case of Investors’ relief, it determines whether it’s potentially available. In other cases, you may be asked for the relevant dates in the exam.
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