Tax Consultant Carter Backer Winter
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Structures and buildings allowance: What you need to know

Tax advisers need to understand the mechanism of the structures and buildings allowance (SBA) and the associated compliance burden. Reshma Johar explains the key points and pitfalls. 

3rd Feb 2020
Tax Consultant Carter Backer Winter
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HMRC has now published some detailed guidance on the SBA in its Capital Allowances manual at CA90100 to CA90450.

The SBA can apply to contracts for construction or purchase entered into on or after 29 October 2018, and provides a 2% flat rate relief of cost on a straight-line basis over 50 years. The following conditions apply:

  • The business claimant (individual or company) must have an interest in the land where the structure or building is constructed
  • Must be a qualifying expense on a structure or building used in a qualifying activity
  • Not available for a dwelling house or part of a building used as a dwelling, including furnished holiday lets
  • Applies to extensions and refurbishments of existing premises including preparatory work to the site (excluding altering land)
  • The relief is only claimed when first brought into qualifying use.

The allowance is adjusted where the accounting period is less than a year, and there are no balancing adjustments on sale. It is claimed on the tax return as with other capital allowances.

Construction stage

It will be necessary to maintain a detailed analysis of expenses incurred on a construction project alongside documentary evidence of when completion took place. Advisers will need to establish how the structure or building will be used within the business to ensure there is entitlement to the allowance. 

Expenses will have to be analysed to strip out any plant and machinery as this will not qualify for the SBA. Instead utilise other available capital allowances such as annual investment allowance, integral features and long life assets.

There are a number of expenses that do not qualify, such as costs incurred in obtaining planning permission and altering land or landscape, other than site preparation.

It must also be highlighted to business claimants that the SBA is effectively a cashflow advantage as it represents a timing benefit (see below).

Claiming the allowance

A claim must be made via the tax return in the same way as for other capital allowances, however this can only take place once the structure or building is first brought into qualifying use or when the claimant is due to pay for the asset (whichever is later).

Claimants will not be permitted to submit estimates where actual amounts are unknown, instead expenditure is treated as nil. 

Unlike other capital allowance claims, a disclaim of the SBA in a year will result in the loss of entitlement as there is no carry forward of value to later years.

A separate tax pool will be required for every new structure or building, therefore these should be clearly identifiable to avoid any future confusion. For example, any renovations or later additions to a structure or building after the date in which it had first entered into use, will be treated as a separate allowance claim and require its own tax pool.

Adjustments to SBA claims may be required if the accounting period is less than a year or the structure or building does not qualify for the entire period. Advisers need to be alert to when there is any change in use of the structure or building to establish whether the relief can still be applied. 

Any periods of disuse, damage or demolition may affect the ability to claiming the SBA. Adjustments to allowances may be required if the structure or building has multiple uses and part of it is used for a non-qualifying activity.

Selling the structure or building

A sale of an asset will not result in any balancing adjustments. Instead on disposal of the asset, when calculating the capital gains tax, the base cost of the structure or building will be reduced by SBA that may have been claimed. Hence the SBA claimed is clawed back on disposal.

As part of the disposal advisers may have to prepare an “allowance statement” for each structure or building disposed of, containing:

  • details of the structure including address
  • date of earliest written contract for construction (this can include emails or board meeting notes)
  • total qualifying costs
  • date the claimant started using the structure for a non-residential activity.

Claims of SBA for second-hand purchases will require the claimant to obtain the allowance statement from all previous owners.

Buying second hand

Relief under the SBA will only be available to taxpayers with a legal interest in the land (either freehold or leasehold) at some point in the chargeable period of claim. The asset acquired may not have previously been used, and as such may not provide details of the construction costs.

In this situation an apportionment of the valuation may be necessary to strip out any value of land. The buyer will have to obtain the allowance statement (may be more than one if there have been renovations or additions). Where there is no allowance statement the expenditure is deemed to be treated as nil.

As there are no balancing adjustments, buyers will inherit the written down value for tax and claim the 2% flat rate allowance per annum for the remainder of the 50 year period. This is subject to the structure or building being used for a qualifying purpose.


Given the numerous requirements of the SBA, advisers will be required to spend more time on collating information, analysing and calculating allowances for claims. 

Businesses will have to consider whether their current processes are sufficient to capture the information required to substantiate a claim for SBA. Finally, it should be noted that the SBA comes with an anti-avoidance rule to deny or restrict relief in certain circumstances.

Replies (4)

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By Wilson Philips
09th Feb 2020 21:25

Very helpful article - although, can you point to the legislation which says that the CGT base cost is reduced on a disposal.

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Replying to Wilson Philips:
Lone Wolf
By Lone_Wolf
10th Feb 2020 11:37

Looks like TCGA 1992 s37B is the culprit. Rather than reducing the base cost as the article suggest, the consideration for the disposal is treated as being increased by an amount equal to the amount of SBA that has been claimed. Same effect though.

A strange way to go about it in my mind, specifically allow the cost in s39, only to claw it back with s37B.

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Replying to Wilson Philips:
Lone Wolf
By Lone_Wolf
10th Feb 2020 11:38

Double post

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By Plantworth
25th Feb 2020 16:45

Thanks for the article.

A few thoughts on when purchasing a used building:

1. Unsurprisingly, clauses will be required in purchase agreements requiring the seller to provide:

allowance statement(s),
evidence of expenditure amount
(probably) evidence of contract dates

Without the allowance statement and evidence of expenditure, a purchaser will not be able to claim SBA on the purchase transaction. The evidence of expenditure requirement in particular is likely to prove onerous.

2. Currently, there is no explicit requirement for a claimant to submit an allowance statement with the tax return, in order to claim the SBA. Where an allowance statement is obtained from the seller and it is submitted by the purchaser, there is no time limit from the purchase date by when it must be submitted (unlike a S198 election). An enquiry can be raised on a SBA claim at any time during ownership. By association, this means the source allowance statements created/obtained by the claimant and evidence of expenditures, can be enquired into at any time time during ownership. The enquiry period is effectively open-ended for allowance statements/evidence of expenditures.

This is in stark contrast to a S198 election for fixtures where closure/tax certainty is achieved within a relatively short and certain time frame. In order to claim the allowances on the S198 election amount, it must be submitted with the tax return within 2 years of the purchase date. If no enquiry is raised during the statutory enquiry period, the election is deemed agreed.

3. When purchasing a used building from the developer who constructed it, the SBA amount is the expenditure incurred by the developer.

Purchasing a building that has never been used:

1. No allowance statement required here. However the purchaser will require the original capital construction cost details where the original constructor was a non-developer (S270BC (2) and S270BM).

Interestingly under the equivalent S295 for IBAs, an estimate of the original construction cost was undertaken in the absence of the actual original construction costs. This methodology was usually accepted by HMRC as a means of complying with that section. There was no separate evidence of expenditure requirement as there is now with SBA under S270BM.


1. Under CA Manual note CA90200, where a contract is entered into, HMRC requires that the date of contract and the date the physical works commence, must both occur after 28 October 2018, in order to comply with S270AA (1)(a).

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