Structures and Buildings Allowance for commercial properties

Structures and Buildings Allowance, or SBA, is available for expenditure incurred on or after 29 October 2018, on new non-residential structures and buildings where the purpose is for commercial use. For those of you out there who are constructing new buildings or improving existing ones, this could be a welcome incentive.

Expenditure on works to bring buildings and structures into existence and to enhance existing structures and buildings are eligible, along with the costs of conversion of a building for use in a qualifying activity. This could be property letting or using the property as a capital asset in the course of its business. SBA can be claimed independently of capital allowances on expenditure incurred on plant and machinery but, unlike spending on plant and machinery, SBA will not qualify for the Annual Investment Allowance (AIA).

SBA is available to businesses carrying on a qualifying activity and is available at a rate of 2% per year on a straight line basis, over a fixed 50 year period from when the structure or building comes into qualifying use. Unlike capital allowances on plant and machinery, there is no system of balancing charges or balancing allowances on a disposal of an asset. Rather, the purchaser will continue to claim the annual allowances of 2% of the original cost. To benefit from the allowances, businesses must keep records of all expenditure incurred on the project and all spending attributable to the land.

Failure to claim the relief will be a lost opportunity – it isn’t eligible to be carried forward to a later period.

If SBA is claimed, an individual’s allowable cost for chargeable gains purposes on a disposal is reduced by the total amount of relief that they have claimed.

The relief is not available for structures or buildings where a contract for the construction work was agreed prior to 29 October 2018. With regards to speculative building contracts and those structures or buildings constructed ‘in house’, relief will also not be available where the building activity began before 29 October 2018.