Structures and Buildings Allowance (SBA) – Part 2

What You Can Claim the Allowance On

If you paid more than the market value for a structure or its construction costs, you can only claim the original market value.

You can claim on the following construction costs:

• Design Fees

• Site Preparation

• Construction Works

• Renovation, Repair, and Conversion Costs

• Fitting Out Works

If You Build or Renovate a Structure

You can claim the SBA on the amount spent on construction costs, even if you lease the structure from someone else.

If You Buy a Structure from a Developer

• Unused Structure: If you buy an unused structure from a developer, you can claim the SBA on the price you paid, after deducting any items that are ineligible for the claim.

• Used Structure: If you buy a used structure from a developer, you can claim on the developer’s construction costs.

If You Buy a Structure from Someone Who Is Not a Developer

• Unused Structure: If you buy an unused structure, you can claim on the lower of:

  • The price you paid for the structure

  • The original construction cost

• Used Structure: If you buy a used structure, you can claim the SBA on the same amount the previous owner was entitled to claim.

• R&D Allowance: If any previous owner claimed a research and development allowance, you can claim for the remaining allowance period, but not more than the amount you paid for the structure.

What You Cannot Claim

You cannot claim on costs for:

• Residential Properties or any structure located in the grounds of a residence

• Plant and Machinery that qualifies for separate allowances

• Costs Already Used to claim another allowance

• Items Included in the Price of the Structure, such as land, integral features, and fixtures

• Planning Permission Fees

• Financing Costs like loans

• Legal and Public Inquiry Costs

• Landscaping or Land Reclamation Costs

• Costs Covered by Grants or Contributions

If You Sell or Dispose of the Structure

Your allowances stop when the structure is sold or disposed of.

• Transfer of Allowance Statement: Pass a copy of the allowance statement to the new owner so they can claim any remaining allowances.

• Tax Implications: You may need to pay additional Capital Gains Tax or Corporation Tax. You must add the total SBA claimed to your disposal receipts when calculating your capital gain or loss.

Enhanced SBA in Special Tax Sites

A special enhanced SBA rate of 10% is available for qualifying expenditure incurred in designated Freeport and Investment Zone special tax sites, valid until 30 September 2034. This relief is only available for construction costs within these areas. (Full details)

Example Calculation

Let’s say you built a factory costing £900,000, with all contracts for works entered into on 7 January 2019. The factory was completed on 21 November 2019 and you began using it for your engineering business from 1 December 2019. Accounts are prepared annually ending 31 December.

For the chargeable period ending 31 December 2020:

• 2% per year for 96 days from 1 January 2020 to 5 April 2020

• 3% per year for 270 days from 6 April 2020 to 31 December 2020

Calculation:

• 96366×£900,000×2%=£4,722\frac{96}{366} \times £900,000 \times 2\% = £4,72236696×£900,000×2%=£4,722

• 270366×£900,000×3%=£19,919\frac{270}{366} \times £900,000 \times 3\% = £19,919366270×£900,000×3%=£19,919

Total claim for the year ended 31 December 2020:
£24,641

Record-Keeping

Ensure you maintain a record of all the days you claimed the 2% rate during this period or any earlier periods.

If you don’t sell or dispose of the structure within 33 1/3 years from the start of the allowance period, you can claim any shortfall in allowances at the end of that time.