Structures and Buildings Allowances

Technical note

In 2018, the UK Government introduced the Structures and Buildings Allowance (“SBA”) in respect of new expenditure incurred by businesses on non-residential buildings and structures. This relief provides tax deductions for expenditure incurred on certain assets that would not previously have qualified for capital allowances, potentially reducing the cost of investment and carrying on business in the UK.

The purpose of the new legislation is to stimulate investment in the construction, development and improvement of commercial buildings and structures.


SBAs are available for qualifying expenditure incurred on the construction of new, and the enhancement of existing, commercial buildings and structures. This relief may be available in respect of both UK and overseas properties, where the businesses incurring the expenditure are within the charge to UK tax. Note this relief is not available for expenditure incurred on buildings which are in ‘residential use’.

Relief is available on a straight-line basis currently at 3% per annum, i.e. over 33⅓ years.

Qualifying SBA expenditure

Qualifying expenditure can include amounts incurred on structures and buildings, as well as incidental expenditure (such as demolition works and/or land alterations to facilitate construction). No relief is available in respect of expenditure incurred on land, other than the alteration of the land for the installation of a building or structure.

Qualifying expenditures does not include expenditure that would qualify for plant and machinery allowances (“PMA”). In order to benefit from the SBA, businesses must therefore undertake a capital allowances analysis to segregate expenditure relating to the provision of structures and buildings from expenditure on the provision of plant and machinery. Businesses can continue to claim PMAs in respect of qualifying expenditure incurred on the provision of plant and machinery, at the higher rates of annual relief.

Residential use

Buildings and structures treated as being in residential use include most forms of residential housing such as private dwellings, student or senior accommodation, boarding schools and prisons. Notable exceptions include hotels and nursing/care homes. Where a property is subject to a mixture of residential and non-residential use, the cost of the provision of the building will need to be apportioned on a just and reasonable basis between the residential and non-residential elements.

Relevant interest

In order to claim the SBA, the taxpayer needs to hold a ‘relevant interest’ in the buildings or structures in respect of which expenditure has been incurred. The definition for these purposes derives from what constitutes an interest in land under property law, which includes a freehold title and a lease (and, typically, an agreement to lease) but not a mere licence (unless such licence amounts to a lease in substance).

Annual relief

From April 2020, SBAs are available on a straight-line basis over 33⅓ years (i.e. 3% per annum). Unlike with PMAs, in the event that SBAs are not claimed in respect of a period, the allowances will not be available to be carried forward to a later period, and the benefit will be lost.

For any subsequent capital projects, the availability of SBAs will need to be separately considered. If applicable, SBAs will be available on a straight-line basis over 33⅓ years from the date the new additions are brought into use (with the first year’s allowance time apportioned from this date). Once brought into use, even if subsequently the building or structure is temporarily not in use, SBAs will continue to be available as long as the claimant continues to hold the relevant interest.

For properties that are demolished in their entirety, SBAs will no longer be available and the balance of unclaimed SBAs will be lost. SBAs claimed up to the point of demolition will be treated as deemed consideration in the Chargeable Gains computation.

SBA expenditure does not qualify for the Annual Investment Allowance (AIA), which is only available for expenditure incurred on the provision of plant and machinery.


For SBAs to be available, all contracts for the physical construction must be entered into on or after 29 October 2018. This may extend to demolition or enabling works contracts in preparation for the construction of the particular building or structure.

For projects where internal employees carry out the construction works (and there may, therefore, not be a specific contract in place), SBAs are available where such works commence on or after 29 October 2018.


As with PMAs, there is scope for a lessee to claim SBAs in respect of a property it leases, to the extent the lessee incurs its own qualifying SBA expenditure, e.g. as part of a tenant fit-out. The lessee can claim SBAs during the term of its lease.

On the expiry of the lease, SBAs will no longer be available but the balance of unclaimed SBAs will effectively be allowed as a capital loss for the lessee (which can be offset against other capital gains within the company/group).


On the sale of a property in respect of which SBAs are applicable, any SBAs claimed during the vendor’s period of ownership will be treated as additional consideration in the Chargeable Gains computation. This differs from the existing provisions relating to plant and machinery, whereby PMAs cannot create or increase a capital loss but do not impact a capital gain (which remain unchanged).

The vendor will need to provide an ‘allowance statement’ to the purchaser, setting out:

  • The date of the earliest contract for the construction of the building or structure;
  • The amount of qualifying SBA expenditure incurred; and
  • The date it was first brought into use.

Provided this allowance statement is obtained, the purchaser will inherit the residual SBA pool, which will be written down over the remainder of the 33⅓ year period. This is the case even where the vendor is an entity not within the charge to UK tax, as the 33⅓ year period begins from the date of first use, regardless of whether SBAs have/could have been claimed.

In addition, the grant of a long lease (for a term of more than 35 years and conferring at least 75% of the market value of the property) is treated as the lessee acquiring the relevant interest and transferring entitlement to claim SBAs from the lessor.

In the event that a newly built property is acquired from a developer, the new owner may be able to claim SBAs based on the part of their own purchase consideration which relates to the acquisition of the building or structure.

Anti-avoidance provisions

Targeted anti-avoidance provisions have been enacted which will deny or restrict tax relief if arrangements are entered into where one of the main purposes is obtaining a more favourable tax position in relation to SBAs.

Practical considerations

For each construction project, it will be necessary to establish when the contract for the relevant works was entered into and the date on which the structure/building was brought into use in order to support any claims for SBAs and to provide an allowance statement to a future purchaser (even in cases where the seller has not made a claim). In many cases, this data may currently not be recorded in accounting records as a matter of course.

This could be especially complex for taxpayers with large property portfolios and numerous ongoing construction projects throughout the year. In such circumstances, it is likely that these projects would have different contract dates and the relevant buildings/structures would be brought into use at different times. Businesses should, therefore, consider methods for tracking this data going forward.

In certain cases, the legislation allows simplified approaches to be adopted whereby the start of the 33⅓ year clock for SBAs can be deferred, e.g. until the beginning of the next chargeable period without need to time apportion in year one. This could be worth considering where annual additions are too numerous to track effectively on an asset-by-asset basis.

Find out more…

This note is based on the law in force as at 9 February 2021. Please be aware that this note does not cover all aspects of this subject. To find out more about any aspect of the above, please discuss with your usual Deloitte contact. If you do not have a usual contact, please contact Peter Millwood ( or Pavel Delvig ( For further information visit our website at

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