Business Management Toolkit

As a director, you’re legally responsible for running the company and making sure information is sent to Companies House on time. This includes:

• the confirmation statement
• the annual accounts – even if the company is dormant
• any change in your company’s officers or their personal details
• a change to your company’s registered office address
• an allotment of shares
• the registration of any charges (mortgage)
• any change in your company’s people with significant control (PSCs) or their personal details

You may need to file a company tax return to HMRC and pay Corporation Tax on profits.

You can hire a professional (for example, an accountant) to help manage your company, but you’re still legally responsible for your company’s records, accounts and performance.

The Institute of Directors’ Chartered Director programme sets out the following approach to the board role:

• Establish vision, mission and values (and review)
• Set strategy (and review)
• Delegate to management, evaluate and reward performance, and establish effective controls
• Exercise accountability to stakeholders and report to/liaise with them regularly

KEY ELEMENTS OF GOOD CORPORATE GOVERNANCE

 Honesty, trust and integrity

• Responsible decision making
• Transparency and accountability
• Competency and commitment of board members
• Respecting the rights and expectations of shareholders (members)

These are typically expected of all Company Directors.

The director information hub from the Insolvency Service offers guidance for new and existing directors on all aspects of how to run a company responsibly.

• Director’s Responsibilities for Health and Safety
• Directors – Differences Between Directors and Managers
• Directors – Duties, Responsibilities and Liabilities
• Directors – Role of Non-Executive Director
• Directors – Role of the Chairman, MD, Chief Executive

From this Autumn, it will become mandatory for all company directors and people with significant control (PSCs) to verify their identity to prove who they are. This is a new legal requirement under the Economic Crime and Corporate Transparency Act 2023 to help prevent people using companies for illegal purposes.

Taking action now will help you to avoid delays or complications. If your company has multiple officers, allow plenty of time for each one to verify their identity. Directors based outside of the UK may also need extra time if they plan to use an authorised agent, also known as an Authorised Corporate Service Provider (ACSP) to verify their identity.

You can verify:

• online using GOV.​UK One Login – if you have the identity documents or information required
• in person at selected Post Offices – you must live in the UK and will need to use the ‘Verify your identity for Companies House’ service first to find out if you can verify this way
• using an Authorised Corporate Service Provider (ACSP) – for example, an accountant or solicitor who has registered as a Companies House authorised agent (you’ll need to provide suitable identity documents)

What happens when you verify

Identity verification is a two-step process.

Step 1: Verify your identity and get your Companies House personal code.  This code is personal to you, not the company. Keep this information secure until you need to use it. You can view your personal code in the ‘manage account’ section of your Companies House account.

Step 2: From autumn 2025, link your verified identity to Companies House records.  Information on how to do this has not yet been issued.

The Act gives Companies House the power to play a more significant role in disrupting economic crime and supporting economic growth. Over time, the aims is that the measures will lead to improved transparency and more accurate and trusted information on its registers.

There will also be new responsibilities for:

• all new and existing company directors
• people with significant control of a company (PSCs)
• anyone who files information on behalf of a company

More details can be found here and a guide to changes to Company Law can be found here.

Every business has a legal responsibility to ensure reasonably foreseeable business risks can be effectively managed and addressed.  The Construction Design and Management Regulations and now the new Building Regulations build on the concept of duty holders.  Duty Holders must be able to demonstrate individual competence and organisational capability. 

Risk and Quality Management (including accreditation to standards such as ISO9001 and 99001) sit at the core of any demonstration of organisational capability.  To support best practice and accreditation, FIS has developed the FIS Quality Framework:  Product Process People (PPP) and Integrated Management Standard, which can be accessed via our Organisational Capability Toolkit.

In addition to best practise, ISO accreditations for management systems require organisations to demonstrate that they meet all their legal obligations and monitor changes in relevant legislation. 

 To meet this requirement, holding and maintaining a legal register is an important measure that can nonetheless be time consuming and quite daunting for those unfamiliar with navigating the government legislation portal.

 AVISO are an FIS service provider member that publishes legal registers free of charge:

• Broad scope registers for companies operating in the UK, EU and devolved nations
• Registers specific to accreditations for ISO 9001 (quality), ISO 14001 (environmental), ISO 45001 (health & safety) and ISO 27001 (information security)
• Free sign up to quarterly updates on changes to legislation

UK Legal Registers

These registers can be used by members to compile a baseline that can be maintained and refined over time, otherwise AVISO offer a chargeable service to build a bespoke legal register specific to your organisation.

 The government legislation portal can also be used to quickly find and read any relevant legislation.

Legislation.gov.uk

Any members who are having difficulty understanding or interpreting legislation should reach out to info@thefis.org, and we will endeavour to advise or provide legal services.

FIS Members (qualifying as an SME) can also access free British Standards through their membership of FIS  

UK competition law (specifically Article 101 of the Treaty on the Functioning of the EU and Chapter I of the UK Competition Act 1998) prohibit any agreements, arrangements or concerted practices between undertakings which may affect trade within the EC and/or UK and which have as their object or effect the prevention, restriction or distortion of competition.  Post Brexit, this has been migrated into UK Law.  It places requirements on companies and makes clear Director responsibilities.

To raise the level of awareness within firms about competition law and the rules with which firms have to comply, the CMA has launched a package of materials to help business. This includes:

• a quick guide on how to avoid disqualification
• a checklist on how to comply with competition law
• a #StopCartels campaign page that houses:
• an interactive quiz to test knowledge of the law and what is/ isn’t permitted
• case studies with lessons learnt and information
• reporting form and info on immunity from fines under our leniency programme

Build UK has also produced guidance on preventing anti‐competitive behaviour in construction. The guidance, which is available to FIS members here, has been written by Wedlake Bell LLP and explains common violations of competition law, such as cartel activities and cover pricing, with the latest CMA decision now included as a case study. It is designed to help businesses and directors comply with their legal obligations by explaining the risks and the steps they should take.

FIS Guidance: Enterprise Act 2002 – The Facts

What is Cashflow

Cashflow is key to any successful construction business and the most common cause of failure in a business.  Essentially cashflow is the measure of a company’s ability to pay its bills on a regular basis. It depends on the timing and amounts of money flowing into and out of a business each week and month. Good cashflow means that the pattern of income and spending in a business allows it to have cash available to pay bills on time.

• Members can Download the FIS Guide to Cashflow Management here

What to do if you are worried about Cashflow

Don’t bury you problems – remember it is illegal to knowlingly trade insolvent. If you’re facing overwhelming debt, managing a challenging financial situation, or seeking crucial commercial funding it is important to get the right advice and make clear informed decisions.

FIS has a dedicated cash flow partner, BABR who offer free helpline support and will help you consider your options, empowering you to make the right choices. They’ll give you the courage you need to take the necessary steps towards success. FIS members don’t have to face challenging financial situations alone, BABR are here to help you overcome them.

For more information on how to access support from BABR click here

Debt Collection

Credit control is critical.  BABR (link above) offer debt collection services, but it is critical for every firm in construction to have clear terms and a payment schedule that encourages applications to be raised promptly and chased efficiently.  More advice in getting your terms and conditions, creating payment schedules and submitting payment applications is provided in the FIS Contractual and Legal Toolkit here

FIS has complied a useful checklist to support Debt Collecting by Phone 

The importance of Credit Checks

FIS offers its members a free credit checking service on UK-based companies. The reports contain details on the companies’ creditworthiness, registered address, any CCJs, credit limit, company accounts (where available) and full details of any directors. You can even check your own organisation to see your current rating.

To access FREE FIS Credit Checks (delivered via CreditSafe) click here. 

 

Administration is when a company is given legal protection from creditors while an appointed administrator attempts to rescue the business or achieve a better outcome for creditors than liquidation would provide. During this time, creditors generally cannot pursue claims against the company without court permission.

It’s important to note that in cases like this, immediate payments to creditors are rare, except in exceptional circumstances. Most creditors will need to wait for the administration process to be completed, which can take time. Therefore, it’s crucial to manage expectations regarding cash flow.

Details of the appointment and a Q&A from the administrator is available here.

Insolvency

Insolvency describes a situation when a company or individual can’t pay what they owe on time, or when the value of their assets is less than the money they owe.  The law (mainly the Insolvency Act 1986) sets out formal legal processes for insolvent companies.

It is important for businesses to have a good handle on cashflow and ensure that they are trading solvent.  Wrongful trading occurs when directors continue trading despite knowing there is no reasonable prospect of avoiding insolvency, potentially leading to personal liability for company debts and disqualification. Fraudulent trading, involving deliberate dishonesty and intent to defraud creditors, is a criminal offense with potential for imprisonment. 

The ICAEW guide provides an excellent guide to insolvency and restructuring.

Remember if you are in distress it is advisable to talk to an insolvency and restructuring practitioner at the earliest possible opportunity, whilst you still have options. 

BABR have partnered with FIS and have a dedicated helpline and resources available for our members, offering support and advice in all areas of credit control, debt recovery, commercial finance, and insolvency solutions. 

For more information on the FIS Insolvency and Restructuring Helpline Click here

What to do if you are impacted by an Administration or Insolvency of a Customer

FIS has developed a number of steps to consider if you are impacted by an insolvency:

Step 1 Review your contracts. Your contract should provide details of how to act in the event of an administration and insolvency.  Remember you could be in breach of contract if you withhold services whilst a company is in administration and insolvency has not yet be confirmed.

A key thing to look for is whether the contract is a Collateral Warranties, these are used to bridge the contractual gap and create a direct contractual link for the benefit of those parties that may otherwise have no recourse. Some collateral warranties can also contain ‘step-in’ rights which effectively allow the beneficiary to step in to the underlying contract and issue instructions.  Under a simple contract should the main contractor of a project fall into insolvency the subcontractor will be under no contractual obligation to accept instructions from the employer to complete the works given there exists no contractual relationship. The use of a collateral warranty in this instance creates a direct contractual link allowing the employer to give instructions to the subcontractor, ensuring completion of the latter’s obligations is achieved.

Step 2: Assess any ongoing work: determine the stage of each project and identify any outstanding deliverables.  Submit any outstanding applications.

Step 3: Document all work completed to date. Take detailed photographs, videos and notes as this documentation will be crucial for any future claims or negotiations.

Step 4:  Recovering Tools, Plant and Materials. The administrators will advise that retrieval of equipment and / or materials will not be a matter for the Administrators and should be arranged directly between customers and any applicable contractor.  Contact should be made with the client to arrange a time to visit your project sites to retrieve any tools, equipment or materials that belong to you. Ensure you have documented proof of ownership for any assets you remove to prevent any disputes – this is particularly the case with materials where ownership may be less clear.

Step 5: Do not pursue unauthorised actions such as attempting to remove materials or equipment that are not legally yours. Also, ensure you do not cause any damage to the sites or completed works.

Step 6: Prepare your financial records by compiling a comprehensive list of all outstanding invoices, including amounts due, due dates and any retention sums. Keep records of all communications and transactions related to your ISG projects for reference.

Step 7:  Get a grip on Cash flow: Do a detailed cashflow forecast, given the likely delays and possibility of defaulted payments, consider all your options and GET PROFESSIONAL HELP if required.  Through your membership of FIS you have access to specialist financial advice and BABR have offered additional interim advice here.

Step 8:  Renegotiations: Speak to other clients and suppliers to potentially renegotiate payment terms or request upfront payments to help cover any cash flow gaps.

 

Further information is available via the ICAEW Guidance Below

ICAEW_A Creditors Guide_to_Insolvency

The myriad of insurance products available to construction businesses can be confusing, below we provide a brief definition of the various types of insurance common for businesses in the Finishes and Interiors Sector.

Employers’ Liability Insurance – is designed to provide cover for an Insured’s legal liability for injury arising out of the Insured’s actions or failures to act where a duty of care is owed. If an Employee suffers death, disease, illness or injury as a result of an Employers negligence, they may look to bring a claim against their employer. However, the employee in question will need to prove their employer breached that duty of care and that in turn led to said injury, disease or illness. For example, an employer failing to undertake adequate risk assessments or providing adequate Personal Protective Equipment (PPE).

If a legal liability were to be established, a UK Employers Liability policy is designed to respond in accordance with the terms, conditions and exceptions of the policy.

Public Liability Insurance – is designed to provide cover for an Insured’s legal liability for injury and/or damage to third party person/s and/or their property arising out of the Insured’s actions or failures to act where a duty of care is owed. If a third party such as a customer or member of the public suffers death, disease, illness or injury as a result of a companies’ negligence, they may look to bring a claim against the company.. However, the person/s in question will need to prove the company breached that duty of care and that in turn led to said injury, disease or illness. For example, proving that they contracted the disease either whilst at a contract site under the companies control or from the contractor working in their property.

Professional Indemnity Insurance – defends against claims of negligence, subject to the insured party paying the initial excess set out in the policy.  PI insurance is usually expected to be maintained through the whole period of design liability this is normally either 6 or 12 years.  Cover can be fully retroactive for neglect, error or omission of professional duty in respect of past services.  Cover would typically include claimants’ costs and expenses, defence costs, investigation costs, and some policies may extend to include mitigation costs, however a retroactive restriction date may be placed on the policy. This date is normally the earliest date from which professional indemnity cover has been held continuously. PI insurance will not ordinarily cover defective workmanship or unfit contractor supervision unless expressly included within the insurance policy.

For further information on Professional Indemnity Insurance in the Construction Sector:  BuildUK Report on PI Insurance for Construction

• Understanding Professional Indemnity Insurance

Construction All Risks – Contractors’ all-risk insurance covers all risks normally associated with construction works. It is designed to cover cost of unforeseen loss or damage to works and risks associated with machinery and plant, it will often include public liability and business interruption. Policies and what is included as “insured works” vary substantially.

Business Interruption Insurance – The core purpose of Business Interruption Insurance is to respond to losses sustained as a consequence of an insured material damage loss, for example, following a fire or flood at an insured premises. Some policies may also include extensions for losses following certain events where there is no physical damage, albeit these are usually subject to lower limits and typically for losses occurring at the insured’s premises or within a specified distance thereof.

Directors & Officers Liability Insurance / Employment Practices Liability Insurance – To protect against possible claims that may arise against directors and offices in the event a business is considered to have inadequately prepared itself to handle how an outbreak may affect the business. Any claim brought by an employee (against their employer) for breach of employment law would ordinarily be the subject of a claim under an Employment Practice Liability Insurance policy, for example, an employee claiming for wrongful termination. Employers should check whether they have such coverage in place (it may be arranged in isolation or as part of a Management Liability policy).

Performance Bond – is a guarantee issued by an insurer, bank or surety company (guarantor) on behalf of a contractor.  If the contractor defaults on the building contract the bond will will cover additional costs in completing the contract up to the bond amount.

Warranty Bonds – are designed to ensure that a project is completed as per the specification.  If the work or materials are found to be sub-standard during the period of the warranty then the contractor is obligated to remedy the issues or the bond will be subject to a claim.

Payment Bonds – a payment bond is a bond posted by a contractor to guarantee that its subcontractors and material suppliers on the project will be paid, should the contractor go bust or default on payment, this protects the client and supply chain from non-payment.  A retention bond is similar in so far as, if there is no reason to withhold the retention or the company holding retention seizes to trade the amount is guaranteed through a bond.

For support in negotiating your insurance, please contact the FIS via info@thefis.org.uk or visit our Membership Benefits Hub here to see the specialist support we can offer through our Insurance Partner Construction Shield.

Corporate social responsibility (CSR) has traditionally been seen as the domain of large organisations. This is mainly because small firms feel that it’s not relevant to them, or that they don’t have the time or resources to get involved in community or environmental projects.  However, being a responsible business is something that all firms should consider as evidence shows that it cannot only
increase competitiveness, but can also boost profits. Having a CSR policy is also becoming increasingly important when
bidding for public sector contracts.  

FIS Factsheet: How to be a Responsible Business explains what CSR really means, the benefits of being a responsible business and the simple steps you can take to achieve this

 

HMRC has produced a step-by-ste guide on Making Tax Digital for VAT as a business. You can follow these steps if you’re a business or sole trader and you need to follow the rules for Making Tax Digital for VAT.

The process covers:

• Check if you have to join
• Get the right software
• Sign up for Making Tax Digital for VAT
• Authorise your software

Access the guide here.

What is Reverse Charge VAT?

Members need to clear when and how reverse charge VAT should be deployed.

In simple terms it means that whilst VAT must still be accounted for at each stage in the supply chain, for construction work the cash will only be collected on the top contract, VAT will be shown but the money will be reverse charged (zeroed out on the invoice) and payments will therefore be net VAT on all invoices below this in the supply chain.

If you are used to charging and paying VAT it may have a negative impact on cashflow.  This simple calculator helps you to work out this impact – Reverse VAT Simple Cash Flow Calculator

Determining whether the Reverse Charge Applies – communicating with your customer

Reverse charge VAT will involve decision making before an invoice is sent to a customer based on the nature of the work done.  Your accounts departments will need to know whether the customer is VAT registered and whether the customer is CIS registered to determine whether the Reverse Charge is to be applied.

You should collect customers VAT registration numbers and CIS UTR to help determine status.  It is always worth requesting an End-User Certificate to confirm VAT status, we have provided an example below (see template below).

Communicating with Sub Contractors

It is suggested a letter or email is sent to your VAT registered subcontractors to draw their attention to the coming changes and start them thinking and planning. The more firms that know and understand that there are changes ahead the better. This letter is not just for your subcontractors. Imagine your contractors sending it to you, many contractors will use it or their own form of words. (see template below)

What are end users and intermediaries?

An ‘end user’ is a term used in reverse charge law and needs thought and to be understood.  It is a business who will use the building or structure themselves in their own business either as a building to sell, or to rent out, or for their own use, e.g. as offices.

Development and property companies are end users because they will rent or sell what they have commissioned. They deal in assets rather than supply construction services.

Another construction business who will add your work to their work and bill everything to a client as construction services is NOT an end user.

Intermediary suppliers are VAT and CIS registered businesses that are connected or linked to end users by either being part of the same corporate group or by having a relevant interest in the same land where the construction works are taking place.  The reverse charge does not apply to supplies to end users and intermediary suppliers where they tell their supplier in writing that they’re end users or intermediary suppliers.

FIS members are reminded to pay particular attention to use of intermediaries such as agencies and payroll companies to understand the implications of VAT associated with their services and credit options that they may have available to mitigate any impact.

This handy flow-chart helps you to determine the status of your client (it should be read in conjunction with the training guidance notes here).

What else needs to be done

Make sure to test your own cash flow, and consider whether you are likely to have issues due to the impact.  There is a spreadsheet available to help you do this in the links below.  There are a number of options still open to you.

Consider becoming a Monthly Repayment Trader

One option to help you limit the impact on cashflow is to apply to become a monthly repayment trader (the spreadsheet in the links below helps you to compare the impact).  Apart from the additional admin, cash flow is the biggest concern. Many companies will be paying out VAT on material and non-construction services, but will not be collecting it on their invoices, so you will be down by the VAT for a quarter.  Worth talking to your accountant and you need to check that you will benefit, but effectively if you move to a situation where the VAT are going to be owing you money, you can consider moving to monthly returns.

To switch to monthly returns you can:

• Ring the HMRC helpline 0300 200 3700
• Apply online to change your registration details
• Fill in form VAT 484 and send it to the address on the form

If you cannot pay your tax bill on time

If you simply ignore it and then do not have the funds to pay your tax bill, you will be liable to fines and in worst case, HMRC could serve you with a winding up order.  If you approach HMRC in advance there are payment options that can be agreed.

Find out more about Time to Pay Arrangements

Resources to help you to comply

Useful Links

FIS Reverse VAT – Webinar – The implementation date for reverse charge VAT accounting in the construction sector is 1 October 2020. Main contractors and subcontractors affected by the change need to understand what this means and to start preparing now, ready for its implementation.

Latest webinar on Reverse Charge VAT from HMRC

A simplified introduction to Reverse Charge VAT and how it relates to the interiors sector was prepared by Haslers for the FIS in the May edition of the SpecFinish magazine (see Page 14-15)

Public guidance has now been released and is available here.  We urge all members to download a copy and take the time to read it. Companies must not start reverse charging before the start date.

To access the Legal and Taxation helpline call:  0121 707 0077

Latest Updates

1.3.21 Reverse Charge Introduced – FIS maintains a list of Frequently Asked Questions (available here) – don’t hesitate to feed your questions in or seek clarification where needed

19.2.21 FIS Writes to Chancellor urging for an Extension to VAT Deferral and Flexibility in Apprentice Funding – with time short and delay unlikely, FIS has written to the Chancellor seeking financial support for impacted businesses in meeting VAT bills.

29.1.20 #StopReverseVAT Campaign – FIS, alongside Build UK, is part of a coalition of industry trade bodies calling on the Chancellor to withdraw the VAT Reverse Charge which is due to be introduced on 1 March.

15.1.20 Last ditch call to see sense and delay the implementation of Reverse Charge VAT – Following a meeting with HMRC this week, FIS has joined forces with a number of trade bodies from across the construction sector to urge the Chancellor to review the implementation of the Reverse Charge VAT on the 1st March 2021.

3.12.20 FIS Calls for Reverse Charge VAT plans to be scrapped – FIS has joined a powerful coalition construction bodies in calling for reverse charge VAT plans to be scrapped.  In a letter signed by 44 bodies, the coalition points out that many SMEs in the supply chain are critical to delivering the Government’s ‘Build Build Build’ strategy.  The introduction of Reverse Charge VAT will have a significant negative impact on the industry, substantially increasing the burden on business and restricting cash flow in what is already an extremely difficult economic climate.

Annual Investment Allowance

This information sheet provides an overview of the annual investment allowance and relocatable partitions.

Research and development (R&D) tax credits are a government incentive designed to reward UK companies for investing in innovation.  Innovation can be within a project, relate to a new product or be part of a business improvement programme.  

The R&D tax relief for SMEs allows your company to: 

• deduct an extra 86% of your qualifying costs from your trading profit for tax purposes, as well as the normal 100% deduction, to make a total of 186% deduction 
• claim a payable tax credit if the company has claimed relief and made a loss 

The payable tax credit is worth up to:

• 10% of the surrenderable loss 
• 14.5% of the surrenderable loss if the company meets the intensity condition for expenditure on or after 1 April 2023 (read how to meet the intensity condition section of this guide) 

Help to see if your work qualifies as Research and Development for tax purposes

CAUTION:  The rules around R&D Tax Credits have been tightened in successive budgets.  Members are recommended to exercise caution in working with “no win no fee” type consultancies and ensure that they are members of the Chartered Institute Of Taxation and covered by the Professional Conduct in Relation to Taxation (PCRT)

If you build, buy or lease a structure and all construction contracts were signed on or after 29 October 2018, you may be able to claim tax relief through an allowance provision known as the Structural Building Allowance (SBA).

You (or your clients) may be able to claim a 3% tax relief a year on Building Works where the construction contracts were signed on or after 29 October 2018.  You must have paid some or all the costs towards the purchase, construction or renovation of the structure and this structure must:

• have not been used as a residence the first time it was used or during the period you’re claiming for
• be used for a qualifying activity
• have an allowance statement

What you must use the structure for

The structure must be used for a qualifying activity, which is taxable in the UK.

Qualifying activities are:

• any trades, professions and vocations
• a UK or overseas property business (except for residential and furnished holiday lettings)
• managing the investments of a company
• mining, quarrying, fishing and other land-based trades such as running railways and toll roads

What you can claim the allowance on

If you paid over the market value for a structure or its construction costs, you’ll only be able to claim for the original market value.

You can only claim on construction costs, which include:

• fees for design
• preparing the site for construction
• construction works
• renovation, repair and conversion costs
• fitting out works

If you build or renovate a structure

You can claim on the amount you spent on construction costs, even if you lease the structure from somebody else.

If you buy a structure from a developer

If you buy the structure unused from a developer, you can claim 2% per year on the price you paid to the developer, after deducting items you cannot claim for.

If the structure was sold by a developer, has been sold more than once and you’re the first person to use it, you can claim 2% per year on the lower of either the price:

• paid to the developer when they sold it
• you paid for the structure

If you buy a used structure from a developer you can claim 2% per year on the developer’s construction costs.

If you buy a structure from somebody that is not a developer

If you buy the structure unused and from somebody that is not a developer, after deducting items you cannot claim for you can claim 2% per year on the lower of either:

• the price you paid for the structure
• the original construction cost

If you buy a used structure from somebody that is not a developer, you can claim 2% per year on the same amount that the previous owner was entitled to claim.

If the previous owner was able to claim a research and development allowance, you can claim for what would be left of the 50 years. But, you cannot claim more than the amount you paid for the structure.

What you cannot claim

You cannot claim on costs:

• for any residence or any structure located in the grounds of a residence
• which also qualify for plant and machinery allowances
• you’ve already used to claim another allowance
• for other items included in the price of the structure, such as land, integral features and fixtures
• for planning permission
• for financing, such as loans
• for public enquiries or legal expenses
• for landscaping or land reclamation
• for which you received a grant or contribution

Remember costs which qualify for the 100% annual investment allowance (AIA) e.g. plant and machinery can be claimed separately, just not through this allowance.

What type of expenditure qualifies for the SBA?

• Capital expenditure on renovations or conversions of existing commercial structures or buildings.
• Repairs incidental to the renovation or conversion of existing commercial structures or buildings.
• Construction and associated costs and fees for new properties:
• Claims are restricted to the lower of:
  • The actual amount of expenditure which must be evidenced.
  • Market value.

What are qualifying activities?

SBA applies to capital expenditure on structures and buildings used for qualifying activities:

• A trade, profession or vocation.
• A UK or overseas property business that is not a Furnished holiday let

Structures and buildings include:

• Offices, retail and wholesale premises
• Walls, bridges and tunnels
• Factories and warehouses.

Can I claim the SBA on expenditure on dwellings and land?

No. Expenditure on residential property and other buildings that function as dwellings will not qualify:

• certain types of properties which may still qualify for relief despite having some residential use.
• Expenditure on acquiring land or rights over land does not qualify for relief.

How does the SBA apply to leasehold property?

• It depends on the length of the lease as to who is entitled to the allowance.
• What if my expenditure qualifies for other capital allowances?
• Qualifying expenditure can only be claimed once.
  • Where parts of a structure or building qualify for allowances as plant and machinery or as Integral features and fixtures the expenditure is not allowed under the SBA.

How do I deal with qualifying expenditure which has multiple uses?

• Where a structure or building has multiple uses, an appropriate proportion of expenditure will qualify for relief.

Do renovations and later additions to the property qualify?

• Capital expenditure after the date when the building enters into use qualifies for a separate allowance with its own 50 year allowance period.
  • Expenditure must be tracked per year to ensure the correct allowances are claimed.

What about changes in the use of the structure or building?

• Where a structure or building originally used for a qualifying activity has a change of use and becomes a dwelling SBAs cease to be available for the period for which it is in use as a dwelling.

What about periods of disuse, change of use, damage to and demolition of  the property?

• The allowance can continue to be claimed during periods of disuse.

What happens when there is qualifying expenditure by a person not chargeable to tax?

Where construction costs are incurred by anyone not in the charge to UK tax:

• Notional allowances are calculated and deducted from the qualifying expenditure.

What about when the building or structure is sold?

• Where an asset qualifying for relief is sold, the new owner can claim the allowance if it is used for a qualifying activity.
• There are no balancing adjustments on disposal.
• Where the SBAs are transferred to a new owner, the amount of the original expenditure may need to be verified if SBA is not already being claimed (via an Allowance statement).

What is an Allowance statement?

• An allowance statement must be provided by the first owner and to all future owners to enable them to claim the allowances or the qualifying expenditure will be treated as nil.
• An allowance statement is a written statement.

Anti-avoidance rules

To ensure relief can be obtained only for genuine business costs on actual construction works, anti-avoidance rules deny or restrict the relief in certain circumstances.

For more information click here

Have you considered claiming R&D Tax Credits?

At the October Budget, the changes to Inheritance tax, pensions and Business Property Relief (BPR) undermined
stability and succession plans for thousands of family run businesses, right across the country. Established almost
50 years ago and upheld by successive governments of both main parties, the conventions around BPR have
helped family businesses navigate a challenging economic environment over the years, safe in the knowledge that
if the owner should pass away, they will not be at a disadvantage. At a stroke, the Budget removed this safety net
and completely undermines the future viability of these firms.

• Access the FIS Factsheet on Business Property Relief

Whilst we commonly lease cars and telecommunications equipment, leasing a refurbishment or fit-out is less familiar to many, but it is becoming an increasingly popular funding option for businesses moving or refurbishing their office.   

Lease options can cover everything from desking, seating and storage through partitioning, cabling, flooring, air conditioning systems, ceilings, lighting, and even (staff-room) kitchens.  Leasing ban help to overcome objections to starting a project based on availability of cash, by reducing capital outlay and moving to monthly repayments.  This can help to remove barriers to work starting or create additioal resource to ensure that corners don’t have to be cut when budgeting for your space.  Lease financing can also provide some tax advantages to the client.  

A typical lease period is around 5 years, but this can vary and lease options are available from as little as £1,000 with no maximum amount.  

FIS Webinar:  Lease Finance and Fit-out

We spoke to Plus Finance to explain the role that lease financing can play in helping clients to spread the cost and offset investment against tax and at the same time helping contractors overcome client objections and increase confidence in getting paid.

You can listen again to the FIS webinar (run in partnership with Plus Finance) explaining how Lease Financing can help Fit-out contractors win work here

Whole life costing is not new, but it is becoming much more important as long-term building owners start to demand evidence of what their costs of ownership will be and PFI consortia try to assess the financial risks of taking on long term responsibility for building operation and maintenance. This Fact Sheet gives owners, consultants, constructors and advisors a brief introduction to whole life costing, and some of its advantages and pitfalls.

FIS Factsheet on Whole Life Costing