Structures & Buildings Allowances: What Investors Overlook
The Reintroduction of Relief for “Bricks and Mortar”
When Structures & Buildings Allowances (SBAs) were introduced in 2019, they marked a long-awaited return of relief for structural and non-plant expenditure, effectively reversing the exclusion of pure construction costs from the capital allowances regime since 1984.
SBAs allow a flat-rate 3% deduction per annum (since April 2020) for qualifying expenditure on non-residential structures, spread over 33⅓ years. While the headline rate appears modest, SBAs can significantly improve the effective tax position on major developments and long-term assets, particularly when modelled alongside other reliefs such as plant & machinery allowances.
Qualifying Criteria and Common Pitfalls
Qualifying expenditure must:
Be incurred on new construction, renovation or conversion of non-residential property;
Relate to physical structures and walls, rather than plant or integral features;
Be used for qualifying business purposes (i.e. not dwellings); and
Be incurred after 29 October 2018.
Importantly, land acquisition costs, planning fees, and rights over land remain ineligible. Where projects involve both structural and mechanical elements, a cost segregation analysis is critical to ensure expenditure is correctly allocated between P&M, IFAs and SBAs.
Ownership and Disposal Implications
SBAs are unique in that they follow the property owner, not the occupier. When a property is sold, the unrelieved balance transfers to the purchaser, unless the property has ever been used for residential purposes. No balancing adjustment arises on disposal, but failure to maintain adequate records (including the required “SBA statement”) can result in the loss of future entitlement altogether.
This is particularly relevant for property investors, funds, and REITs, where long asset lifecycles and multiple ownership changes are common.
The Overlooked Planning Opportunity
Investors often underestimate the value of integrating SBAs with development strategy. For example, in forward-funded developments or design-and-build contracts, structuring the construction contract and ownership timeline correctly can ensure that SBA entitlement vests in the intended beneficiary, not the developer or lessor.
Additionally, capitalised leasehold improvements can, in some cases, qualify for SBAs where incurred by tenants, provided the asset’s life extends beyond the lease term.
In Summary
The true value of SBAs lies not in the nominal rate but in comprehensive project scoping, data capture and documentation.
For investors managing high-value assets over long durations, the ability to claim and preserve, relief across ownership changes is an often-overlooked element of tax-efficient asset management.