Structures and buildings allowance

By Tolley
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The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Structures and buildings allowance
  • What is structures and buildings allowance?
  • What expenditure qualifies for SBA?
  • Who can claim SBA?
  • Amount of SBA
  • Leases
  • How to claim SBA
  • Evidence of entitlement to SBA
  • What happens when the building is sold?
  • What happens if the building is demolished?

What is structures and buildings allowance?

From 29 October 2018, expenditure on constructing a commercial building or structure, or in certain cases, expenditure on acquiring such a building or structure, qualifies for a structures and buildings allowance (SBA).

SBA is given at an annual rate of 2% of the qualifying expenditure on a straight-line basis over 50 years, as a deduction in calculating the taxable profits of a trade or other qualifying activity.

There is no system of balancing charges or balancing allowances on a subsequent disposal of the asset; instead the purchaser can continue to claim the annual allowance of 2% of the original cost for the rest of the 50-year period.

CAA 2001, s 270AA(5)

Although the allowance is available where construction begins on or after 29 October 2018, the final legislation governing the SBA was only introduced on 4 July 2019. A technical note  was issued on Budget day, 29 October 2018 and, following initial consultation, draft legislation  was published on 13 March 2019. There was then further consultation with amended draft legislation published on 17 June 2019. This final draft was essentially the same as the final legislation.

SI 2019/1087 (subscription sensitive)

Changes were made to the proposed rules throughout the consultation process. As a result, if decisions were made according to earlier draft rules, it will be necessary to confirm whether or not expenditure qualifies for SBA under the final legislation.

The remainder of the guidance note refers only to buildings but applies also to structures.

What expenditure qualifies for SBA?

An SBA can be claimed for capital expenditure incurred on the construction or purchase of a building. This is referred to as qualifying expenditure.

The construction of the building must begin on or after 29 October 2018 and the contract for construction works must be

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