The Structures and Buildings Allowance (SBAs) gives a 3% annual tax relief for the cost of constructing new non-residential structures and buildings and new conversions or renovations.
The SBA applies to all construction contracts in relation to the build, purchase or lease of a structure which was signed on or after 29 October 2018. It’s a capital allowance that’s often missed, but could help many businesses – particularly given 2023’s corporation tax changes
Eligible expenditure includes the costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence.
The allowance does not apply to the cost of land, land remediation (such as for contaminated land), Stamp Duty Land Tax (SDLT) or equivalents in Scotland and Wales, or the cost of obtaining planning permission.
The SBA applies to overseas structures and buildings as well, if the business is within the charge to UK tax.
Expenditure on integral features and fittings of a structure or building is currently allowable, as expenditure on plant and machinery continues to qualify for plant and machinery writing-down allowances.
Applicable rates and allowance period
The applicable rate for structures and buildings allowance projects in these periods
| Corporation tax | Rate |
|---|---|
| 29 October 2018 to 31 March 2020 | 2% |
| 1 April 2020 onwards | 3% |
| Income tax | Rate |
|---|---|
| 29 October 2018 to 5 April 2020 | 2% |
| 6 April 2020 onwards | 3% |
The allowance period is the period of time during which a person is entitled to make a claim to the structures and buildings allowance in respect of qualifying expenditure, provided they meet all of the required conditions.
The allowance period is 33 and one-third years from the allowance period start date. That start date is the later of:
- the date the building is first used for a non-residential purpose
- the date the qualifying expenditure is incurred
The sale of the asset will not result in a balancing adjustment. Instead, the purchaser takes over the remainder of the allowances over the remainder of the 33 1/3-year period.
In determining the capital gain accruing on the disposal of a property where the SBA has been claimed, the disposal consideration is treated as having increased by the amount of the SBA claimed by the transferor.
Can we help?
If your business could benefit more from Structures and Buildings Allowances, our team of specialists are happy to advise and help.
Specific advice should be obtained before taking action, or refraining from taking action, in relation to the above. If you would like advice or further information, please speak to your usual Shipleys contact.
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