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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
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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.

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Replies (7)

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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.

Thanks (0)
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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