Structures and Buildings Allowances (SBA)

The following article is based on draft legislation and at the time of writing final legislation had not been published.

SBA is available for costs incurred on the conversion or renovation of new commercial structures and buildings used for qualifying activities where the construction contract for works was entered into on or after 29 October 2018.

Structures and buildings include offices, retail and wholesale premises, walls, bridges, tunnels, factories and warehouses but do not include dwelling houses or structures and buildings used for a residential purpose. It is not only available to UK structures and buildings but also those overseas where the business owning the asset is within the charge to UK tax.

The relief is given at a flat rate of 2% over a 50 year-period and passed on to the purchaser on any sale of the asset during the period. Expenditure qualifying for SBA does not qualify for the annual investment allowance (AIA).

A claim for SBA can be made by the company or individual incurring the expenditure providing that at the time the expenditure was incurred they (normally) held the freehold in the property or a lease exceeding 35 years.

Qualifying expenditure

The relief is applied to the costs of physically constructing the structure or building, including costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence. Capital expenditure does not include costs that can be allowed as a deduction in calculating the profits of the business.

It also includes incidental repairs and expenditure incurred in preparing the site but excludes the cost of the land, expenditure on altering the land through reclamation, remediation and landscaping and the costs incurred in obtaining planning permission.

Where a structure or building is divided into separate parts, some of which qualify, an appropriate proportion of expenditure will qualify for relief.

Qualifying activity

To be eligible for the SBA, the building must have been brought into use for a ‘qualifying activity’ including the following:

• a trade, including a ring-fence trade in the oil and gas sector;
• a profession or vocation;
• a UK or overseas property business;
• managing the investments of a company with investment business, to the extent that any profits or gains from the activity are chargeable to tax; and
• the carrying on of mines and transport undertakings.

A claim for the SBA can only be made once the property has come into use.

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