Key facts
- SBA provides a 3% straight-line annual deduction on eligible construction costs.
- The allowance applies to commercial buildings and structures — not residential property.
- Qualifying expenditure must be on contracts entered into on or after 29 October 2018.
- The building must be used for a qualifying activity (trade, profession, vocation, or specified non-trading purpose).
- An allowance statement must be obtained and retained — it is a statutory requirement.
How the SBA Provides Relief on Commercial Property
The Structures and Buildings Allowance (SBA) was introduced in the Autumn Budget 2018 to give businesses tax relief on the cost of constructing, renovating, or converting commercial buildings and structures. Before SBA, there was generally no capital allowance available on buildings themselves (only on plant and machinery within them).[1]
SBA provides a 3% flat-rate (straight-line) annual deduction on qualifying construction expenditure. Over the structure’s qualifying life, 100% of the cost is eventually relieved. The deduction is claimed each year through the company’s CT600, submitted online to HMRC.
What Qualifies?
SBA covers the costs of:[1]
- Construction of a new commercial building or structure
- Renovation or conversion of an existing commercial building
- Costs of demolition preparatory to construction on the same site
- Fees directly related to the construction (architect fees, planning fees, site preparation)
What Doesn’t Qualify
- Land costs (including acquisition costs and stamp duty)
- Residential property (dwellings, unless used for qualifying trade purposes such as a care home)
- Plant and machinery within the building (claim plant & machinery capital allowances instead)
- Expenditure on contracts entered into before 29 October 2018
The 29 October 2018 rule: SBA only applies to construction contracts entered into on or after 29 October 2018. The rate was initially 2% (for expenditure from October 2018 to March 2020) and increased to 3% from April 2020 onwards. The 3% rate now applies to all SBA claims.[2]
How SBA Works
Unlike plant and machinery allowances (which use a reducing-balance method), SBA is calculated on a straight-line basis:
| Detail | SBA Rule |
|---|---|
| Annual rate | 3% of the qualifying construction expenditure |
| Relief period | 33⅓ years (until 100% of the cost is relieved) |
| Start date | The later of: the date the building is first used, or the date it is brought into qualifying use |
| Pro-rating | For the first and last years, the allowance is time-apportioned to the number of days of qualifying use |
Example: A company constructs a new warehouse at a cost of £600,000 (excluding land). It is brought into use on 1 July 2025. The annual SBA is £600,000 × 3% = £18,000 per year. In the first accounting period (if year-end is 31 March 2026), the allowance is time-apportioned: 274 days / 365 × £18,000 = £13,512.
The Allowance Statement
To claim SBA, the claimant must hold a valid allowance statement. This is a statutory requirement and must be in writing. It should include:[1]
- The name and address of the person who incurred the qualifying expenditure
- The date construction began and the date the building was first used
- The amount of qualifying expenditure
- Details of the building’s location
If the building is sold, the allowance statement passes to the new owner (or a copy must be provided), allowing them to continue claiming SBA on the remaining balance.
Purchasing an Existing Building
When you buy a second-hand commercial building that was constructed (or renovated) after 28 October 2018, you may be able to continue claiming SBA:
- The original qualifying expenditure remains the basis for the allowance — not the purchase price
- The remaining SBA is calculated over the unexpired part of the 33⅓-year period
- You must obtain an allowance statement from the seller
Important: If you pay more than the original construction cost for the building, you do not get additional SBA on the premium. SBA is always based on the original qualifying construction expenditure.[2]
Frequently Asked Questions
What is the Structures and Buildings Allowance?
SBA is a 3% straight-line annual deduction on the cost of constructing, renovating, or converting commercial buildings and structures. It was introduced in 2018 to give tax relief where no capital allowance previously existed for buildings.
What is the SBA rate?
The current rate is 3% per year on a straight-line basis, meaning the full cost is relieved over 33⅓ years. The allowance is time-apportioned in the first and last years of qualifying use.
Does SBA apply to residential property?
No. SBA only applies to commercial buildings and structures. Residential property does not qualify, unless it is used for a qualifying trade purpose such as a care home.
What is an allowance statement for SBA?
An allowance statement is a statutory document that must be held before claiming SBA. It records who incurred the expenditure, the construction dates, the amount, and the building’s location. It passes to any new owner on sale.
Further Reading
- Capital Allowances Overview — how SBA fits alongside plant & machinery allowances
- Writing Down Allowances — for plant & machinery within the building
- Annual Investment Allowance (AIA) — 100% relief on qualifying fixtures and fittings
- Balancing Charges & Disposals — what happens when a building is sold
- Taxable Profits Explained — how SBA deductions reduce taxable profit
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