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HMRC Structures and Buildings Allowances guidance published

HMRC Structures and Buildings Allowances

HMRC have recently published guidance on the newly introduced Structures and Buildings Allowances.

Harinder Soor

Partner – Claims and Incentives

KPMG in the UK


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Since the introduction of the Structures and Buildings Allowances (SBA) from 29 October 2018, taxpayers and advisers have been waiting for HMRC’s guidance to better understand how the legislation will be interpreted in practice. HMRC’s latest guidance is a good start, but a number of questions remain (HMRC have stated that further updates to the Capital Allowances Manual will follow). Businesses should be considering whether their current processes are sufficient to capture the information required to substantiate a claim, so they can benefit from this new tax relief.

To recap, SBA was introduced at Autumn Budget 2018 to provide tax relief for expenditure on structures and buildings which previously received no form of capital allowances (with the main exclusion from SBA being residential buildings). Relief is available for capital expenditure on both new buildings and extensions/refurbishments of existing premises, where all contracts for construction work were entered into on or after 29 October 2018.

The key learning points from the guidance are as follows:

  • HMRC defined qualifying ‘construction costs’ as including fees for design, site preparation, renovation, repair, conversion and fitting out works;
  • Where a building or structure is acquired unused from a developer, the SBA claim is based on a just and reasonable apportionment of the purchase price (separating the value of land, buildings and plant and machinery fixtures). However where a building is acquired used from a developer, SBA is limited to the developer’s original construction cost (note in this scenario the apportioned value of fixtures is not restricted, and is based on the purchaser’s actual expenditure);
  • HMRC confirmed that exclusions from eligible expenditure include residential buildings, qualifying plant and machinery, allowable revenue repairs, planning permission, financing costs, land and landscaping costs, and legal expenses. As a result, a detailed cost analysis will need to be prepared before claims are submitted;
  • An allowance statement will need to be submitted with the first claim in a tax return for each separate construction project, detailing the date of construction contract, qualifying SBA expenditure identified and date of first use following completion. Purchasers of second-hand property must obtain a copy of the allowance statement from any previous owner of the property, which again must be submitted alongside their first claim; and
  • On disposal of the structure, the total SBA received will be added to the disposal proceeds for the purposes of calculating any chargeable gain or loss.

There remain areas of uncertainty, particularly in relation to deciding whether a project is deemed to have commenced prior to 29 October 2018 by virtue of any ‘construction contract for the building’ being entered into prior to that date. Where this is the case, all construction costs for that project will be excluded from SBA. The legislation defines construction contracts as “any contract for works to be carried out in the course of construction of that particular building or structure”. It is not clear how this relatively broad definition will be applied by HMRC (for example whether this would include contracts for architect and design services, which on a typical construction project are incurred in advance of committing to build a property through appointment of a building contractor).

As noted above, there is differing treatment for used and unused buildings acquired from a developer. However, there is no definition of ‘use’ and whether, for example, a pre-let agreement being in place would deem the building to be ‘in use’.

HMRC have committed to updating the Capital Allowances Manual soon, which should help remove the uncertainty on the above points. If you have any questions please get in touch with the contacts to the left.

For further information please contact:

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