Out-Law Guide 3 min. read

UK structures and buildings allowances

A 3% structures and buildings allowance (SBA) is available in the UK for expenditure on the purchase, construction or renovation of non-residential buildings and structures.

The allowance is available provided the expenditure is incurred on or after 29 October 2018 and all relevant construction contracts were signed on or after that date.

The allowance was previously available at 2% for expenditure incurred before April 2020.

Who can claim the allowances?

A UK taxpayer can claim SBAs if they hold the 'relevant interest' in the building or structure. The relevant interest is the interest in the building or structure which was held by the person who incurred the construction expenditure.

If a lease is granted for a capital sum of a building or structure qualifying for SBAs, whether the landlord or the tenant can claim allowances will depend upon the length of the lease. Where the lease is for less than 35 years, the allowances remain with the lessor. If the lease is for 35 years or more and the lessee pays a substantial premium which is tantamount to two-thirds or more of the value of the property, then the right to allowances passes to the lessee.


The tenant under a lease of 35 years or more granted at a premium of two thirds or more of the value of the property should be able to claim allowances on the original construction cost.

A tenant under a lease of any length may be able to claim SBAs if they incur qualifying expenditure on new building works.

Expenditure qualifying for SBAs

Expenditure must be on the construction or acquisition of non-residential structures and buildings. The buildings or structures can be located in the UK or overseas.

The structure must be used for a qualifying activity, which is taxable in the UK. Qualifying activities are:

  • any trades, professions and vocations
  • a UK or overseas property business (except for residential and furnished holiday lettings)
  • managing the investments of a company
  • mining, quarrying, fishing and other land-based trades such as running railways and toll roads.


SBAs are only available in respect of construction costs. These include fees for design, preparing the site for construction, construction works, renovation, repair and conversion costs and fitting out works.

SBAs cannot be claimed for the cost of the land itself, for integral features and fixtures or for costs which also qualify for plant and machinery allowances. 

The first use of the building or structure, after the relevant expenditure was incurred, must be non-residential.

If the structure is purchased unused from a developer who is a trader for tax purposes, the allowances will be available on the price paid to the developer, after deducting non-qualifying expenditure.

If the structure was originally sold by a developer, but has been sold more than once, a taxpayer who is the first person to use it can claim SBAs on the lower of the price paid to the developer when it first sold it and the price paid by the taxpayer for the structure.

The buyer of a used structure from a developer can claim SBAs on the developer's construction costs.

The buyer of an unused structure from a non-developer can claim SBAs on the lower of the price paid for the structure (after deducting non-qualifying expenditure) and the original construction cost.

The buyer of a used structure from somebody that is not a developer can claim SBAs on the same amount that the previous owner was entitled to claim.

Claiming the allowances

SBAs are available at the rate of 3% per year on a straight-line basis over 33 years. They are claimed on a tax return, but can only be claimed if you have an 'allowance statement'.

The first person to use the structure must create a written allowance statement which must include:

  • information to identify the structure, such as address and description
  • the date of the earliest written contract for construction
  • the total qualifying costs
  • the date the structure started to be used for a non-residential activity.

The buyer of a used structure will only be able to claim allowances if they get a copy of the allowance statement from the previous owner, before the claim for SBAs is made.

It will be important for a tax exempt buyer to make sure a written allowance statement is created, even though it will not be able to claim SBAs. This will enable it to pass the benefit of the allowances to a future buyer of the building.

In the case of unused buildings where there is no seller allowance statement it will be appropriate for a buyer to seek warranties from the seller that construction was carried out under contracts entered into on or after 29 October 2018.

Disposal of the building

SBAs cannot be claimed after you have disposed of the building or structure. The disposal will not give rise to a balancing allowance or charge for the seller. However, the amount of the SBA claim may increase any capital gain on a subsequent sale because it will be added to the disposal proceeds.

The buyer should be able to take over claiming the allowances for the remainder of the allowable period, providing it is using the building or structure for a qualifying purpose.

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