Muras Matters: The New Capital Allowances For Structures and Buildings


The Structures and Buildings Allowance (“SBA”) for new non-residential structures and buildings, announced by the Chancellor during the 2018 Budget, has recently been formally incorporated into the capital allowances legislation and claims can be backdated. Prior to the legislation being introduced, capital allowances were not available on the construction costs of buildings, although they have been available for plant and machinery that form an integral feature of a building, such as air conditioning.

The new allowance will provide relief for eligible construction costs incurred on or after 29 October 2018, at an annual flat rate of 2%.


The aim of the SBA is to encourage investment in the construction of new structures and buildings that are intended for commercial use, as well as improvements to existing properties. The SBA will be available to all businesses incurring qualifying capital expenditure used for qualifying activities.

There have been a few amendments to the rules since the original announcement by the Chancellor in the 2018 Budget, but the key features of the SBA remain as follows:

·         Relief will be given at a flat rate of 2% over a 50-year period;

·         Relief will be available for new commercial structures and buildings, including the costs of converting or improving existing premises for use in a qualifying activity;

·         Relief will be restricted to the costs of physically constructing the property, including costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence;

·         Relief is available only for expenditure incurred where all the contracts for the physical construction works have been entered into on or after 29 October 2018;

·         Claims for the relief can only be made once the structure or building first comes into use;

·         Land costs will not be eligible for relief, nor will any associated rights, acquisition costs or planning permission costs;

·         Expenditure on residential property will not qualify for the SBA, nor any part of a building which is used as a dwelling and the remainder of the building is commercial.

It is anticipated most trades and professions, as well as property businesses, will satisfy the qualifying activities condition. Where an asset ceases to be used for a qualifying activity, relief can still be claimed throughout a temporary period of disuse, provided it is not used for a residential purpose.

Expenditure on residential property, and other buildings that function as dwellings, will not qualify for SBA and this exclusion extends to workplaces that are an integral part of a dwelling, such as home-offices. Premises such as hotels and care homes will however qualify for SBA.

Integral features and fixtures within a building will continue to qualify for plant and machinery allowances, including the Annual Investment Allowance, as they do now although the rate of relief will drop from 8% to 6%.

‘Second Hand’ Properties

When as asset qualifying for the SBA is subsequently sold, the new owner will be able to claim the 2% flat rate relief for the remaining part of the 50-year period provided they also use it for a qualifying activity. For example, if a building qualifying for SBA is sold 10 years after it was first brought into use, then the new owner will be able to claim SBA’s over the remaining 40 year period. The new owner’s relief will be based on the original construction expenditure and not the purchase price paid by the new owners.

No balancing adjustment for capital allowances will be available to the seller on disposal of the asset, but the relief already claimed by the seller will reduce the asset’s cost for capital gains purposes.

If you would like further information in connection with the new capital allowances for structures and buildings or have any concerns regarding the points mentioned above, please contact our tax director, Jenny Marks.

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