Structures and Buildings Allowance (SBA) was introduced for new expenditure incurred on or after 29 October 2018.  The actual SBA legislation was finalised in July 2019 and HMRC only updated the detailed guidance on 30 October 2019 here


Introduction to SBA


The SBA is a flat rate 2% allowance, available over a 50 year period, for new non-residential structures and buildings. 


  • SBA is available for works where the contracts for physical construction are dated on or after 29 October 2018. 

    • Where there is no contract e.g. in-house projects, the physical start of works will be the relevant date.

  • SBA is based on the original capital cost of construction or renovation, except where:

    • A building is acquired unused from a developer; the capital sum paid is the amount of qualifying SBA expenditure and a just and reasonable apportionment will be required to identify the Plant and Machinery Allowances (PMA), SBA and to separate the ineligible land cost.

    • Where the developer sells the property unused, then there is a later sale before the property is used, the SBA is the lower of (1) the capital sum paid to the developer or (2) the capital sum paid on the latest sale.

    • A building is acquired unused from a non-developer, the SBA is based on the lower of the original construction cost or the capital sum paid by the purchaser.

  • SBA will be available when a structure or building first comes into non-residential use. 

    • If the first use of a property is for residential use, that original expenditure will never qualify for SBA.

    • For a property business, potentially qualifying use commences when they are entitled to rents and receipts (including rent free periods) calculated at arm’s length.

  • To claim SBA, you must have an interest in the land e.g. freehold, leasehold etc.

  • SBA is available on various assets including offices, retail and wholesale premises, hotels, nursing homes, factories, warehouses, roads, fences, wall, bridges and tunnels. 

  • SBA will also include overseas structures or buildings to the extent the profits of the qualifying activity are chargeable to tax in the UK.

  • SBA expenditure will not qualify for the Annual Investment Allowance (AIA). 


The Exclusions


The principal exclusions for SBA are residential use, expenditure qualifying for Plant and Machinery Allowances (PMA) and land.


  • Residential use includes dwellings, university or school accommodation, military accommodation and prisons. 

    • Ancillary use is also excluded e.g. a swimming pool in the grounds of a dwelling; a car park for a block of flats.

    • The communal areas of a block of flats or student halls (e.g. corridors, lobbies, plant rooms) will be excluded, as they are likely to be deemed ancillary to the dwellings. 

      • This is in contrast to PMA, where the lighting, heating, lifts etc will qualify in these areas. 

    • Serviced apartments, which are typically used for longer term occupation, will be considered to be dwellings.

  • A home or institution providing residential accommodation is excluded, except where providing personal care for:

    • Old age or disability.

    • Past or present alcohol or drug dependence, or mental disorder

    • Personal care involves the administering of personal hygiene, feeding, medication or therapy, but does not include remote monitoring or the provision of meals.

  • Furnished Holiday Letting (FHL) is not a qualifying activity for SBA purposes, so no SBA is available on FHL expenditure.

  • SBA will not apply to acquiring land or rights in or over land.

    • This includes the cost of planning permission, stamp duty, financing costs, capitalised interest and legal, marketing, promotion, agency or arrangement fees. 

  • SBA is also excluded for altering land, which includes:

    • Land reclamation,

    • Land remediation (qualifying for contaminated land relief), and

    • Landscaping (other than landscaping to create a structure).

      • Examples include grass tennis courts; rough, greens and fairways on golf courses; grass football pitches; grass bowling greens. 

  • However the preparation of a site (e.g. cutting, tunnelling or levelling land) for the construction of a building or structure will qualify for SBA.


For a property with mixed use e.g. commercial space on the lower floors and dwellings above, it will be necessary to split the areas for SBA purposes on a just and reasonable basis.  HMRC guidance gives examples split by area and by fractional shares.


If a building has an ‘insignificant’ first use, it will not qualify for SBA in that period.  This is most likely to refer to the number of days of use, particularly where a property is not occupied or initially used for a non-qualifying activity (e.g. by a charity for free).




In order to claim SBA, the actual amount of qualifying expenditure needs to be identified.  This means that estimating is not acceptable, except where a property is acquired unused from a developer (as noted above), where an apportionment will include estimation.


Someone who incurs SBA must create an allowance statement.  This will also apply to non-taxpayers, including Government bodies, pension funds etc.  Where subsequent qualifying work is undertaken for a building already subject to SBA, that additional expenditure can be included separately on the same allowance statement.


The ‘allowance statement’ is a written statement including:

  • Information to identify the building or structure,

  • The date of the earliest written contract for the SBA construction,

  • The amount of qualifying expenditure incurred on the construction or purchase, and

  • The date on which the building or structure is first brought into non-residential use.


If you do not have an allowance statement then the SBA expenditure is £nil.  This means that for second-hand property, this statement will need to be obtained from the vendor or any previous owner.  This may cause significant problems when acquiring from administrators or receivers, who historically will not or cannot provide details of past capital allowances claims.


The HMRC manuals note there is no requirement to routinely disclose the allowance statement to HMRC.  However it should be retained, along with necessary evidence of the construction or purchase expenditure etc, in case of an HMRC enquiry.


Disposal of Property


When a building or structure that has been subject to SBA is sold, the amount of the SBA that has been claimed is added to the consideration received for chargeable gains purposes.  This means that for many property investors, the SBA is just a timing difference, unless the income and gains are subject to different tax rates.


Future owners will continue to claim the flat rate 2% if they (1) have a qualifying activity, (2) have obtained the allowance statement noted above, (3) have the relevant interest and (4) the asset continues to be used for non-residential purposes. 


Other Matters


Without covering every detail, some other points to note include;


  • Disuse will not stop SBA, so an empty building will continue to qualify. 

  • Where an entire property is demolished, the SBA stops.  Relief for the unclaimed SBA is obtained via the chargeable gains calculation in the normal way.

  • If the SBA is not claimed in a tax return, it will be lost and cannot be carried forward to a later period. 

  • The amount of SBA is proportionally adjusted for:

    • Short or long accounting periods;

    • Where an asset is created or sold part way through the period, or

    • The asset is brought into residential use.

  • Where a long lease for 35 years or more is granted, the lessee will be entitled to the SBA if the market value of the lessor’s retained interest in the property is less than one third of the capital sum paid by the lessee.


IMH Advisory Opinion


While the overall intention of SBA is well intentioned, the low rate of tax relief will make little difference to many tax-payers and for corporate property investors, SBA is just a timing difference. 


Therefore the requirement to segregate Plant and Machinery Allowances is necessary and combined with the £1m AIA, will provide potentially significant cash tax savings.  Clearly this segregation may not be ideal for a client only undertaking a small project, creating additional administration and fees vs more modest tax savings.


We can envisage some practical difficulties in the early years of SBA, where projects may wholly or partly fail the SBA commencement tests.  Finally, the rules around evidence will potentially make SBA troublesome, particularly on sales further into the 50 year life of the relevant assets. 

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