Structures and buildings allowance

By Tolley

(Updated for Budget 2020)

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

Structures and buildings allowance
What is structures and buildings allowance (SBA)?
What expenditure qualifies for SBA?
Who can claim SBA?
Amount of SBA
SBA and leases
Evidence of entitlement to SBA
What happens when the building is sold?
What happens if the building is demolished?
SBA and practical points

What is structures and buildings allowance (SBA)?

From 29 October 2018, expenditure on constructing a non-residential building or structure, or in certain cases, expenditure on acquiring such a building or structure, qualifies for an SBA. The following note has been updated for the changes announced in the Spring Budget 2020 but is subject to confirmation in the final legislation.

SBA is given at an annual rate of 3% (from 1 April 2020 for corporation tax and 6 April 2020 for income tax, prior to April 2020 the rate was 2%), of the qualifying expenditure on a straight-line basis over 33 and one-third years, as a deduction in calculating the taxable profits of a trade or other qualifying activity.

The new 3% rate can be claimed on all expenditure, even where the building or structure was bought into use before April 2020. Where a chargeable period spans 1 April 2020 (corporation tax) or 6 April 2020 (income tax) the rate of 2% will apply for days before the relevant date and 3% for the days after that date.

Spring Budget 2020 Overview of Tax Legislation and Rates , para 1.11

Unlike other capital allowances, there is no system of balancing charges or balancing allowances on a subsequent disposal of the building or structure; instead, adjustments may be made to the capital gains computation on the disposal, then the purchaser can continue to claim the annual allowance of the original cost for the rest of the eligible period.

CAA 2001, s 270AA(5)

As with other capital allowances, the SBA must normally be claimed in the tax return. A claim to SBA must be separately identified.

CAA 2001, s 3(2ZA)

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

HMRC has published a guidance note on the SBA and more detailed guidance at CA90000 onwards.

A checklist which can be used by when reviewing whether expenditure on a building or structure qualifies for the SBA can be found in Checklist ― structures and