Every developer knows to claim capital allowances on the plant and machinery bolted into a new commercial building — the lifts, the heating system, the electrics. Far fewer routinely claim on the concrete, steel and brickwork of the building itself. The Structures and Buildings Allowance has been available since October 2018, yet it remains one of the most under-claimed reliefs in commercial property because it sits quietly behind a paperwork requirement most people don't know exists.
What SBA actually covers
The Structures and Buildings Allowance, legislated in Capital Allowances Act 2001 Part 2A, gives relief for the cost of constructing, renovating, converting or fitting out a non-residential structure or building. It applies to offices, factories, warehouses, retail units, hotels, and agricultural and other commercial buildings where the qualifying construction contract was entered into on or after 29 October 2018. Relief is given at a flat 3% a year on a straight-line basis, so the full qualifying cost is written off over exactly 33 and a third years — a rate increased from the original 2% with effect from April 2020.
Unlike plant and machinery allowances, SBA is not front-loaded through the Annual Investment Allowance or full expensing. It is a slow, steady deduction against trading or property income each year the building is in qualifying use, which makes it easy to overlook next to the much larger first-year reliefs available on fixtures and equipment.
What is excluded — and why the split matters
SBA covers the structural shell: the fabric of the building, external works directly related to construction, and associated professional fees such as design and planning costs. It does not cover items that already qualify as plant and machinery, including integral features such as electrical systems, heating and cooling, lifts and sanitary fittings — those remain in the special rate or main pool, typically covered by the £1 million Annual Investment Allowance or, for companies, full expensing.
The land itself never qualifies, nor do costs of landscaping unrelated to the structure. Residential use is excluded entirely: SBA cannot be claimed on dwellings, and where a building is mixed-use — commercial units below flats, for example — the qualifying construction cost has to be apportioned on a just and reasonable basis between the residential and non-residential elements.
Getting this split right at the outset matters more than the SBA claim itself. Every pound wrongly left in the SBA pool instead of the plant and machinery pool is a pound that could have been relieved in year one through the Annual Investment Allowance, sitting instead on a 33-year drip feed. A proper cost segregation exercise at practical completion, separating the true structural spend from qualifying fixtures, is where most of the value in a new-build capital allowances claim actually lives.
The allowance statement: the step that gets missed
SBA has one procedural requirement that trips up more claims than any technical eligibility question. The first person to bring the building into non-residential use must prepare an allowance statement, recording:
- Information sufficient to identify the building or structure;
- The date of the earliest written contract for the construction works;
- The total qualifying construction expenditure; and
- The date the building was first brought into non-residential use.
Without a valid allowance statement, no one can claim SBA on that building — not the original developer, and not any subsequent buyer, however genuine and well-evidenced the original construction spend was. On a sale, the statement has to be passed to the buyer, who then continues writing off the same original cost at 3% a year for whatever remains of the 33 and a third year period; the buyer does not get a fresh 33-year period based on the purchase price. Any solicitor or accountant acting on the purchase of a commercial building constructed since 2018 should be asking for this document as a matter of course — and any developer selling should have it ready before due diligence starts, not scrambled together at exchange.
No balancing allowance — but a sting in the CGT calculation
SBA departs from the plant and machinery rules in one important respect: there is no balancing allowance or balancing charge when the building is sold. The seller simply stops claiming from the date of disposal, and the buyer picks up the remaining years. That sounds tidy, but it has a consequence worth planning around: the total SBA claimed over the period of ownership reduces the allowable cost used to calculate the capital gain (or corporation tax chargeable gain) on eventual sale. In effect, the relief that reduced income or corporation tax profit each year is partially recovered through a larger gain when the asset is disposed of.
This does not make SBA worthless — a deduction now against income or profit taxed at up to 25% corporation tax, recovered years later against a capital gain, is still a genuine timing and cash flow advantage, particularly for a business reinvesting the tax saved. But it does mean SBA should be modelled as part of the eventual exit calculation, not treated as a standalone annual saving with no downstream cost.
Who this applies to
SBA is available to any business within the charge to Income Tax or Corporation Tax incurring qualifying construction expenditure, including property investors constructing or fitting out commercial units to hold and let, not just owner-occupiers or developers building to sell. It is one of the reliefs that makes holding purpose-built commercial stock — new industrial units, retail parades, office space — more attractive than it first appears once the plant and machinery allowances and SBA are claimed alongside each other.
It has particular relevance across the North West's commercial construction pipeline — logistics and industrial sheds around the motorway corridors, office refurbishments in Liverpool and Manchester city centres, and hotel and leisure schemes — where new-build and substantial renovation spend on non-residential buildings is common and the SBA claim is frequently missed simply because nobody asked the question at practical completion.
What this means in practice
If a client has constructed, extended or substantially renovated a commercial building since October 2018, the qualifying cost should be checked against both the SBA rules and the plant and machinery capital allowances rules before assuming the claim has already been made in full. If a client is buying a commercial building constructed within that period, ask for the allowance statement before exchange — its absence is a real cost, not a formality, and it belongs on the same due diligence checklist as title and planning history.
Common questions
What is the Structures and Buildings Allowance?
The Structures and Buildings Allowance is a capital allowance under Capital Allowances Act 2001 Part 2A that gives relief for the cost of constructing, renovating or converting a non-residential structure or building, given at a flat 3% per year on a straight-line basis, writing the qualifying cost off in full over 33 and a third years.
Does the Structures and Buildings Allowance apply to residential property?
No. SBA is restricted to non-residential use, such as offices, industrial units, retail premises, hotels and agricultural buildings. Dwellings and other residential accommodation do not qualify, and where a building is used partly for residential and partly for non-residential purposes the cost must be apportioned.
What is an SBA allowance statement and why does it matter?
An allowance statement is the record the first person to use the building must create, showing the building's identity, the date of the earliest written construction contract, the qualifying cost, and the date the building was first brought into non-residential use. Without a valid allowance statement, a buyer cannot claim SBA on the building at all, however genuine the underlying construction spend.
Does claiming Structures and Buildings Allowance increase the capital gain on sale?
Yes. Unlike plant and machinery allowances, there is no balancing charge on disposal, but the total SBA claimed reduces the allowable cost used to calculate the capital gain or corporation tax chargeable gain when the building is eventually sold, so the relief is a genuine cash flow and timing benefit rather than a permanent tax saving.
Kieran Holsgrove is a Director and Co-Founder of Grafene Accounting, the property tax specialist firm based in Liverpool. He advises property developers, investors and landlords across Merseyside, Greater Manchester, Lancashire and Cheshire on tax structuring, developer VAT, SDLT and the long-view decisions that compound over the life of a portfolio.
This article is general information, not personal tax or legal advice, and the rules referred to can change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.