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Structures and Building Allowance: what it means for property owners

Posted: 03/09/2019


The Capital Allowances (Structures and Buildings Allowances) Regulations 2019 were made on 4 July 2019 and they introduce a new form of capital allowance for property owners who incur capital expenditure on constructing commercial structures or buildings. Although the Regulations are new, the availability of the allowance has been known about since the 2018 Budget and it generally applies to expenditure contracted for on or after 29 October 2018. 

The allowance is available for expenditure on new structures, extensions, conversions and renovations. It gives a 2% per annum deduction for income or corporation tax purposes, spread evenly over a 50 year period. Unusually for capital allowances, there is no balancing charge or allowance when a building or structure is sold – all that happens is that the buyer becomes entitled to the remaining allowance.

The structures and buildings allowance can be claimed on design fees, preparing the site for construction, construction works, renovation, repair and conversion costs, and fitting out works. However, it cannot be claimed on the costs of acquiring the land (including any stamp duty land tax or other fees), seeking planning permission, reclamation, remediation or landscaping. Neither can it be claimed on plant and machinery (for which of course there are separate allowances available).

Who can claim?

The allowance is generally available to any person owning an interest in a property as part of a trade or a letting business which is within the charge to UK tax, provided the property is in non-residential use. It is available both to the person who incurred the expenditure and to people purchasing an interest in land on which such expenditure has been incurred. (A purchaser of a building from its developer can claim the allowance by reference to the purchase price, provided the building or structure has not been used at the time of acquisition. If the building has been used, the allowance is claimed by reference to the actual costs of construction.)

The allowance is available for both UK and overseas properties, provided the owner is within the charge to UK corporation tax or income tax in relation to that business. 

Contributions made by a landlord to a tenant will generally be treated as expenditure incurred by the landlord for the purposes of the allowance. The right to the allowance will pass to lessees where a lease of more than 35 years is granted and the landlord retains less than one third of the economic ownership in the building.  

What is non-residential use?

The allowance is not available in respect of structures or buildings to the extent that they are used for residential purposes. Dwellings, prisons, barracks and student housing are deemed to be used for residential purposes. However, certain types of care home, providing personal care for the elderly, or alcohol or drugs rehabilitation, or care for sufferers of mental disorders, will not be deemed to be 'residential'. If a site is used for a mix of both residential and non-residential purposes, a just and reasonable apportionment of the expenditure should be made.

Disuse and demolition

The allowance is available from the time at which the structure or building is first brought into qualifying use and can continue to be claimed during periods of disuse.

The allowance ceases when the building is demolished. (Taxpayers can elect for demolition to be treated as a disposal for capital gains purposes, in which case any unrelieved expenditure would be claimed as a deduction in arriving at the capital gains computation, although such an election is not always beneficial.)

Claiming the allowance

  • In order to claim the allowance, the property owner must have an “allowance statement”. This is a written statement, identifying the building or structure to which it relates, of the date of the earliest written contract for the construction of the building or structure;
  • the amount of qualifying expenditure incurred on its construction or purchase; and
  • the date on which the building or structure is first brought into non-residential use.

The allowance statement needs to be made by the person who incurred the expenditure, so allowances are only available to purchasers of existing buildings who secure such a statement from their vendors. 

Decrease in writing down allowances

It is not all good news for property owners, however, because the rate of writing down allowances on integral features of buildings (and other long life assets) has been reduced from 8% to 6% per annum with effect from April 2019. The Government expects that the net effect of the new structures and buildings allowance and the reduction in the existing allowances will be neutral for the exchequer until 2023.


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