Structures and Buildings allowance (SBAs) in the UK

While this allowance has been around for some time (2018), it is interesting how underused it appears to be. So here is a little reminder of the SBA.

What is structures and buildings allowance

Structures and buildings allowance are an allowance of capital expenditure incurred on or after 29 October 2018. SBAs are available for qualifying expenditure incurred on the construction of new, and the enhancement of existing, commercial buildings and structures, allowing businesses to claim tax relief against the expenditures made on commercial and business related structures.

Who can claim structures and buildings allowance

The relief is available for both UK and overseas properties, where the businesses incurring the expenditure are subject to UK corporation tax. The relief is available to trade related assets only, not investment assets including expenditure incurred on buildings which are in ‘residential use’.

Relief eligibility

Relief is available on a straight-line basis currently at 3% per annum. SBAs will be available from the date the new additions are brought into use. For SBAs to be available, all contracts for the physical construction must have been entered into on or after 29 October 2018.

What qualifies for structures and buildings allowance

Qualifying expenditure can include amounts incurred on structures and buildings, such as offices, retail, factories, warehouses, wholesale premises, walls, bridges and tunnels. Further construction and incidental expenditure allowed as qualifying also includes costs such as fees for design, preparing the site, renovation, repair and conversion cost, fitting out works and demolition works. No relief is available in respect of expenditure incurred on land, other than the alteration of the land for the installation of a building or structure.

Qualifying expenditures does not include expenditure that would qualify for plant and machinery allowances (“PMA”).

A structures and buildings allowance example

John’s accounting year runs from 1 April to 31 March. John constructs a qualifying building costing £1.2 million which is brought into use on 31 December. For the chargeable period during which the building is brought into use, John can claim £1.2 million × 3% × (3 ÷ 12) = £9,000. For subsequent years, John will be able to claim £1.2 million × 3% = £36,000 per year

Can you claim relief with leased property

Where a property is leased, SBAs will be available to the extent that the lessee incurred its own qualifying expenditure in relation to the building or structure. On the expiry of the lease, SBAs will no longer be available, the balance of unclaimed SBAs will effectively be allowed as a capital loss for the lessee.

Disposing of the Building or Structure

When you sell or dispose of the structure your allowances will stop. You will then be required to pass on a copy of the allowance statement to the new owner so that they can claim any remaining allowances. If the structure is sold, demolished or used for anything other than a qualifying activity, your claim will end. On the sale of a property in respect of which SBAs are applicable, any SBAs claimed during the vendor’s period of ownership will be treated as additional consideration in the Chargeable Gains computation.

Get in touch

For more information on structures and buildings allowance and to find out more about whether you qualify to claim the relief and what expenditure is eligible, get in touch with our tax experts.

Photo by Georg Eiermann on Unsplash