SBA Part 2

What you can claim the allowance on

If you paid over the market value for a structure or its construction costs, you’ll only be able to claim for the original market value.

You can only claim on construction costs, which include:

• Fees for design
• Preparing the site for construction
• Construction works
• Renovation, repair and conversion costs
• Fitting out works

If you build or renovate a structure

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

If you buy a structure from a developer

If you buy the structure unused from a developer, you can claim the structures and buildings allowance on the price you paid to the developer, after deducting items you cannot claim for.

If the structure was sold by a developer, has been sold more than once and you’re the first person to use it, you can claim the structures and buildings allowance on the lower of either the price:

• paid to the developer when they sold it
• you paid for the structure

If you buy a used structure from a developer you can claim the structures and buildings allowance on the developer’s construction costs.

If you buy a structure from somebody that is not a developer

If you buy the structure unused and from somebody that is not a developer, after deducting items you cannot claim for, you can claim the structures and buildings allowance on the lower of either:

• The price you paid for the structure
• The original construction cost

If you buy a used structure from somebody that is not a developer, you can claim the structures and buildings allowance on the same amount that the previous owner was entitled to claim.

If any previous owner was able to claim a research and development allowance, you can claim for what is left of the allowance period. But, you cannot claim more than the amount you paid for the structure.

What you cannot claim

You cannot claim on costs:

• for any residence or any structure located in the grounds of a residence
• which also qualify for plant and machinery allowances
• you’ve already used to claim another allowance
• for other items included in the price of the structure, such as land, integral features and fixtures
• for planning permission
• for financing, such as loans
• for public enquiries or legal expenses
• for landscaping or land reclamation
• for which you received a grant or contribution

If you sell the structure

When you sell or dispose of the structure your allowances will stop. Pass on a copy of the allowance statement to the new owner so that they can claim any remaining allowances.

If the structure is sold, demolished or used for anything other than a qualifying activity, your claim will end.

You may have to pay more Capital Gains Tax or Corporation Tax, because you must add the total amount of structures and buildings allowance you’ve claimed to your disposal receipts to calculate your capital gain or loss.

Example

You built a factory costing £900,000. All the contracts for works were entered into on 7 January 2019.

The factory was completed on 21 November 2019 and you started to use it in your engineering business from 1 December 2019. You prepare accounts for each year ending on 31 December.

In your chargeable period to 31 December 2020, you can claim 2% a year for 96 days from 1 January 2020 to 5 April 2020, and 3% a year for 270 days from 6 April 2020 to 31 December 2020.

96/366 × £900,000 × 2% = £4,722

Plus 270/366 × £900,000 × 3% = £19,919

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

Keep a note of all the days you claimed the 2% rate for in this period or an earlier period. If you do not sell or dispose of the structure within 33 and one third years from the start of the allowance period, you may claim for any shortfall in allowances at the end of that time.