Capital Allowances: Structures and Buildings Allowance (SBA) Explained

We spoke to Anastasiya Kokonova, Capital Allowances Partner at RCK Partners, to explore the Structures and Buildings Allowance (SBA) and how it can support UK businesses investing in commercial property.

‍

While much of the focus around Capital Allowances is often on plant and machinery, SBA plays a crucial role in providing tax relief on the core structure of a building, costs that were historically ineligible for relief. From new developments to property acquisitions and refurbishments, understanding how SBA applies can help businesses unlock additional value, improve cash flow, and ensure no available relief is overlooked.

‍

1.     What is the Structures and Buildings Allowance (SBA) and who can benefit from it?

The Structures and Buildings Allowance (SBA) provides tax relief on the cost of constructing or renovating non-residential buildings and structures. It is available to businesses that incur qualifying capital expenditure on commercial property, allowing them to claim relief over time against taxable profits.

2.     What types of buildings qualify for SBA, and are there any that don’t?

SBA applies to most non-residential buildings, including offices, factories,warehouses and retail units. However, it does not apply to residential properties such as houses, flats or student accommodation. Mixed-use properties may qualify on a just and reasonable apportionment basis.

3.     What kinds of costs can businesses include in an SBA claim?

Qualifying costs typically include construction, renovation and conversionworks, such as building structure, walls, roofs and fixed fabric of the property. It does not include land costs, planning permission, or items that qualify separately as plant and machinery.

4.     How much tax relief can a business expect to receive from SBA each year?

SBA is currently claimed at a flat rate of 3% per annum on a straight-linebasis over 33⅓ years. This means businesses receive consistent, but relativelyslow, tax relief compared to other capital allowances.

5.     If I buy an existing commercial property, can I still claim SBA?

Yes, SBA can be claimed by subsequent purchasers, provided the original construction qualified and the relevant documentation is available. The buyer effectively steps into the seller’s position and continues claiming the remaining allowance.

6.     Why doesn’t SBA apply to residential property, and what should mixed-use property owners do?

SBA is designed to support commercial investment, which is why residential buildings are excluded. For mixed-use properties, owners should apportion costs between qualifying commercial areas and non-qualifying residential areas on areasonable basis.

7.     How does SBA differ from other capital allowances, like plant and machinery claims?

SBA applies to the structure of a building and provides relief at a fixed 3%rate. In contrast, plant and machinery allowances apply to fixtures and equipment within a building and often attract faster relief, including upfront deductions through AIA or first-year allowances.

8.     What information or documentation do I need to make an SBA claim?

To claim SBA, businesses must retain detailed records including construction contracts, invoices, and a formal SBA statement. The statement should include key details such as the date the building was first brought into use and the total qualifying expenditure.

9.     Are there common mistakes businesses make when claiming SBA?

A common mistake is failing to identify and separate plant and machinery fromstructural costs, resulting in missed opportunities for faster relief. Another is not preparing or retaining the required SBA statement, which is essential tosupport a valid claim.

10. How can working with a specialist help maximise an SBA claim?

A specialist can ensure that qualifying costs are correctly identified and that no plant and machinery elements are incorrectly included within SBA. This helps maximise overall tax relief by accelerating claims where possible and ensuring compliance with the relevant legislation.

‍

Conclusion

‍

The Structures and Buildings Allowance is an important, but often underutilised, area of Capital Allowances. While the relief is spread over a longer period, it can still represent significant value, particularly for businesses investing heavily in commercial property.

‍

Ensuring that SBA is correctly identified, documented, and claimed alongside other available reliefs is key to maximising overall tax efficiency. With the right expertise, businesses can confidently navigate the rules, avoid common pitfalls, and make the most of the relief available to them.

‍

If you’re unsure whether you’re claiming everything you’re entitled to, or would like to explore how SBA could benefit your business, get in touch with our team to discuss your property and uncover any missed opportunities.