Introduction of the Structures and Buildings Allowance and what it means for commercial buildings

The Government introduced the Structures and Buildings Allowance (SBA) for eligible construction costs where the contract was entered into after 29 October 2018. The draft statutory instrument was released in June 2019 and provides details on how the allowance will operate.

Aim of the relief

The SBA is intended to encourage investment in the construction of new structures and buildings for commercial use. No allowance is provided for land related costs or buildings used as dwellings (including certain types of student accommodation).

Outline of the relief

Relief is provided at a rate of 2 per cent a year over 50 years on a straight-line basis and is available both for income tax and corporation tax payers. 

Where a property is sold, the remaining balances will continue to be available at the same 2 per cent rate. Although no balancing allowance or balancing charge will arise on a disposal, the capital base cost of the asset will be reduced by the amount of allowances claimed when calculating the capital gain.

The SBA will be available for UK and overseas structures where the business is chargeable to UK tax. Relief is limited to physically construction of the structure and building. Although this will include demolition, it excludes planning permission and the cost of land itself.

Integral features, fixtures and plant will continue to benefit from the existing capital allowance regime and will not be eligible for the SBA. The Annual Investment Allowance is not extended to qualifying SBA expenditure.

Qualifying expenditure

SBA is available for capital expenditure on a structure or building used in a trade, profession, property rental business or managing the investments of a company with investment business. Structures and buildings include offices, retail and wholesale premises, walls, bridges, tunnels, factories and warehouses. Capital expenditure on renovations and conversions of existing commercial structures or buildings will also qualify. The cost of construction will include only the net direct costs relating to physically constructing the asset.

Expenditure on residential property does not qualify for SBA. For these purposes, residential includes university and school accommodation. Premises used as hotels and care homes do however qualify.

Capital expenditure undertaken on a structure or building after the date on which it enters into use will qualify for SBA and will need to be separately tracked over a separate 50-year period.


SBA relief will normally be available when the structure or building is first brought into use for a qualifying activity. Where a company’s accounting period is less than a year, the allowances will be reduced proportionately. If allowances are not claimed (e.g. due to a non-qualifying activity being undertaken) it is lost and cannot be claimed in future periods.

Acquisitions and disposals

When an unused constructed building is acquired, qualifying expenditure will be the price paid by the purchaser less any amount relating to land.

Where a property is disposed of, the remaining relief will be available to the purchaser over the remaining time in the 50-year period. Relief for the period of disposal is apportioned between buyer and seller. Although no balancing allowance/charge arises; for capital gains purposes the asset will be reduced by the total amount of relief that has been claimed up to disposal.

Special rules apply to leases and allocation of the SBA.

If you are undertaking or planning a construction project, capital allowances, including SBA could generate valuable tax savings for you. To discuss how your project may be impacted, please contact Peter Graham. Peter Reynolds or Rupert Guppy from RSM’s specialist capital allowances team.