TQOTW: Structures & Building Allowances

My client has undertaken some development work and has queried whether he can claim the Structures and Buildings Allowances (“SBA”). Please could you outline the rules for the relief to apply?

Your client may be entitled to claim SBA on the expenditure that they have incurred but, like all reliefs, there are a number of conditions to be met. A general outline of the rules has been published by HMRC at:


Broadly, SBA is available to any person who holds a relevant interest in a building or structure and has incurred qualifying expenditure on it after 28 October 2018. The allowance provides for relief at an annual rate of 2% on the total qualifying expenditure over a 50-year period. The legislation was finally enacted on 4th July 2019 by SI 20019/1087 which inserts new CAA 2001, Part 2AA, consisting of sections 270AA to 270IH.

Relevant Interest

Relevant interest includes a freehold interest as well as a lease of 35 years or more on the building and where the lessee pays a substantial premium, equivalent to two-thirds or more of the value of the property. Where the lease is for less than 35 years, the existing allowances remain with the lessor, but relief would still be available for any qualifying expenditure incurred by the lessee on new building works.

Qualifying/non-qualifying expenditure

Qualifying expenditure, provided all relevant construction contracts are signed for on or after 28 October 2018, is limited to the cost of physically constructing the building, including the costs of demolition or land alterations necessary for construction, as well as the direct costs required to bring the asset into existence. Foreign structures and buildings will also qualify where the business is within the charge to UK tax.

Please note SBA expenditure does not qualify for the AIA.

Non-qualifying expenditure includes the costs or rights over the land itself, landscaping or land reclamation, any financing costs or any costs that would continue to qualify for plant and machinery allowances.

Qualifying activities

The first use of the building or structure must also be for a qualifying activity in order to make the allowance available.

Qualifying activities are:

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

Disposal of Assets

Sale of the asset will not result in a balancing adjustment and instead the purchaser, who undertakes a qualifying activity, will take over the remainder of the allowances written down over the remaining part of the 50-year period.

When determining the gain chargeable on sale of the asset, the seller’s allowable costs will be reduced by the SBA claimed. This will happen regardless of whether there is a gain or loss. This differs from the existing rules where there is no requirement to bring capital allowances into account in a capital gains computation unless there is a loss.

Claiming the SBA

Unlike other capital allowances, relief will be lost if it is not claimed. It will not be possible to carry forward relief to a later period and nor will expenditure qualify for SBA if it was incurred more than seven years before the commencement of the qualifying activity.

SBA is claimed on a tax return, but can only be claimed if you have an ‘allowance statement’. The first person to use the structure must create a written allowance statement that must include:

  • information to identify the structure, such as address and description;
  • the date of the earliest written contract for construction;
  • the total qualifying costs; and
  • the date the structure started to be used for a non-residential activity.

The buyer of a used structure will only be able to claim allowances if they get a copy of the allowance statement from the previous owner, before the claim for SBA is made.

It will be important for a tax-exempt buyer e.g. a charity, to make sure a written allowance statement is created, even though they will not be able to claim SBA. This will enable it to pass the benefit of the allowances to a future buyer of the building.

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Tax Advisor
0844 892 2470

Prior to joining the team, Faz worked for PwC for 4 years as a Corporate Tax advisor. During his time there he gained a wide variety of tax experience, ranging from Corporate Tax, Personal Tax, M&A Due Diligence, Trusts, NRLs and Partnerships providing technical advice as well as compliance services to a variety of clients ranging from SMEs to large multi-nationals.

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