Structures and Buildings Allowance (SBA)


HMRC have introduced a new tax relief for commercial properties, whereby relief will be given at a rate of 2% per annum for expenditure on the construction of commercial property that does not qualify for capital allowances as either plant, machinery or integral features where all contracts for construction work on a project were entered into on or after 29 October 2018. The remaining benefit of the allowance will pass to any purchaser on a sale of the property.

The SBA aims to relieve the construction costs for new structures and buildings used for qualifying purposes over their lifetime. This will support business investment in constructing new structures and buildings including necessary preparatory costs, and the improvement of existing ones, as well as improving the international competitiveness of the UK’s capital allowances system.

The Capital Allowances Act 2001 (CAA01) sets out the capital allowances available on business assets. None are currently available for expenditure on most structures and buildings, although capital allowances are available for plant and machinery that forms integral features of buildings, such as air conditioning and electrical systems.

The two percent writing down allowance will be at a flat rate, calculated on the amount of original construction expenditure. There will not be a system of balancing charges or balancing allowances on a subsequent disposal of the asset. Instead, a purchaser will continue to claim the annual allowance of two percent of the original cost. This is intended to ensure that the cost of construction and renovation will be relieved over an average life of buildings.

Key Features

Relief will be limited to the costs of physically constructing the structure or building, including costs of demolition or land alterations necessary for construction, and direct costs required to bring the asset into existence.

Relief is available for eligible expenditure incurred where all the contracts for the physical construction works were entered into on or after 29 October 2018.

Claims can only be made from when a structure or building first comes into use

Land costs or rights over land will not be eligible for relief, nor will the costs of obtaining planning permission.

Expenditure on integral features and fittings of a structure or building that are currently allowable as expenditure on plant and machinery, will continue to qualify for writing down allowances for plant and machinery including the Annual Investment Allowance (AIA) up to its annual limit

Where a structure or building is renovated or converted so that it becomes a qualifying asset, the expenditure will qualify for a separate two percent relief over the next 50 years

Qualifying Expenditure

Structures and buildings include offices, retail and wholesale premises, walls, bridges, tunnels, factories and warehouses. Capital expenditure on renovations or conversions of existing commercial structures or buildings will also qualify. The costs of construction will include only the net direct costs related to physically constructing the asset, after any discounts, refunds or other adjustments. Capital expenditure does not include costs that can be allowed as a deduction in calculating the profits of the business.


Neither land nor dwellings will be eligible for relief. Where there is mixed use – for example, between commercial and residential units in a development – relief will be reduced by apportionment. No relief will be provided for workspaces within domestic settings, such as home-offices.

Expenditure on land or acquiring rights over land will not qualify for relief. This includes any legal costs and stamp duty, or any costs attributable to the obtaining of planning permissions, including the costs of public inquiries.

Renovations and subsequent capital works

Capital expenditure undertaken on a structure or building after the date on which it enters into use will qualify for the SBA, but as a separate allowance. The allowance on such expenditure will also be two percent of the total, and can be claimed over the next 50 years, even if that period goes beyond the writing down period of the original construction costs on that structure or building.

Where the business itself develops the structure or building, rather than acquires it, the cost of any land preparation necessary for construction will qualify for relief.

Where a structure or building is acquired from a developer, then an apportionment of the purchase cost from the developer will be required to separate the amount of the cost that is attributable to the land. The eligible costs will be the overall acquisition cost less the value of the land acquired.


Where leases are granted for periods of 35 years or more and the incoming tenant pays a substantial premium by reference to the value of the property, the benefit of the allowance in respect of expenditure incurred by the landlord will be given to the tenant during the period of the lease. It will then be treated as having been reacquired by the landlord on the expiry of the lease.


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