Since 29 October 2018 you can claim the Structures and Buildings Allowance (SBA) on the cost of constructing, converting or renovating a commercial building. It gives 3% of the qualifying cost each year on a straight line basis for 33 and a third years. Land and dwellings never qualify, and you need an allowance statement before you claim. Fixtures such as heating, lighting and lifts are claimed separately, and on a purchase usually need a section 198 election.

Can I claim capital allowances on a commercial building?

Yes, but in two separate parts. The structure itself (walls, floors, roof, doors and windows) can qualify for SBA if the earliest written contract for its construction was entered into on or after 29 October 2018. The fixtures inside it, such as the electrical system, heating and air conditioning, are plant and machinery and are claimed through the pools described in our guide to capital allowances.

The building has to be used for a qualifying activity: a trade, a profession, a UK property business that lets commercial space, or a similar taxable activity. Residential lettings do not count, so a buy to let landlord cannot claim SBA on a house or flat. Sole traders, partnerships and companies can all claim.

How much is the Structures and Buildings Allowance worth?

SBA is 3% of the qualifying cost a year, claimed evenly for 33 and a third years. For companies the 3% rate applies from 1 April 2020; for income tax it applies from 6 April 2020. Before those dates the rate was 2%.

If you spend £600,000 building a workshop, excluding the land, the allowance is £18,000 a year. On a sale the claim simply passes to the next owner. The allowance starts from the later of the date the building is first brought into qualifying use and the date the expenditure is incurred.

Which costs qualify and which are excluded?

Qualifying costs include design fees, site preparation, the construction works themselves, and capital spending on renovating, converting or extending an existing commercial building. If you buy a new building from a developer, the price you pay (less the value of the land) is broadly your qualifying cost.

HMRC excludes:

  • the cost of land;
  • any dwelling, or any structure in the grounds of a dwelling;
  • anything that qualifies as plant and machinery, including integral features and fixtures;
  • planning permission, financing costs, legal expenses and public enquiries;
  • landscaping and land reclamation;
  • costs covered by a grant or contribution.

Where a building is partly residential, such as a shop with a flat above, the expenditure is apportioned and only the commercial part qualifies.

What is an SBA allowance statement and why do I need one?

Before you make any SBA claim you must have a written allowance statement. If you do not, HMRC treats your qualifying expenditure as nil. There is no prescribed form, but it must show:

  • information identifying the building;
  • the date of the earliest written contract for its construction;
  • the amount of qualifying expenditure;
  • the date the building was first brought into qualifying use;
  • for later spending after that date, the date that expenditure was incurred.

Keep it with your business records for the life of the claim. Anyone who buys the building later will need a copy.

Does SBA pass to a buyer when the building is sold?

Yes. A buyer of a used building continues to claim SBA on the same amount the previous owner was entitled to claim, for whatever remains of the 33 and a third years. What the buyer actually paid is irrelevant. The buyer can only claim if they obtain a copy of the allowance statement from a previous owner, so ask for it before you exchange.

How does SBA affect capital gains tax when I sell?

When you dispose of the building, you add the total SBA you have claimed to your disposal proceeds when working out your gain or loss. In practice the relief you had each year is clawed back through a larger chargeable gain, so SBA is a timing benefit rather than a permanent saving.

How are fixtures treated when you buy commercial property?

Fixtures are often worth far more in allowances than SBA. Integral features (electrical and lighting systems, space and water heating, air conditioning, lifts and escalators, hot and cold water systems and external solar shading) go into the special rate pool at 6% a year. Other fixtures, such as fire alarms and CCTV, go into the main pool, which fell from 18% to 14% from April 2026.

The annual investment allowance of £1 million can cover integral features and other fixtures, including second hand ones, giving a full deduction in year one. Full expensing is different: it is for companies only and needs assets that are new and unused, so it does not apply to fixtures you inherit with a purchased building.

What is the pooling requirement?

For transfers from April 2014, a buyer can only claim on second hand fixtures if the seller, or an earlier owner who was entitled to, has already allocated that expenditure to a pool (claiming AIA or a first year allowance counts). The buyer cannot pool on the seller’s behalf after completion. If the seller never pooled, those allowances are lost to every future owner.

What is a section 198 election?

The fixed value requirement means the seller and buyer must agree what part of the price relates to fixtures. They normally do this with a joint election under section 198 of the Capital Allowances Act 2001, made within two years of completion. If they cannot agree, either party can apply to the First Tier Tribunal within the same two years.

The value fixed by the election cannot exceed the seller’s original qualifying cost of the fixtures or the actual sale price. If the requirement is not met, the buyer’s qualifying expenditure on those fixtures is treated as nil. Settle the value in the contract rather than after completion.

What should I ask the seller before exchange?

  • Is there an SBA allowance statement, and can we have a copy?
  • Have the fixtures been pooled, and by which owner?
  • What value will be fixed in the section 198 election, and is it in the contract?

What happens if HMRC opens an enquiry into my capital allowances claim?

Property claims attract questions, particularly on the split between land, structure and fixtures, the validity of an allowance statement and whether a section 198 election was made in time. Answering them can take many hours of your accountant’s time.

Solar Protect tax investigation insurance covers up to £100,000 of accountant’s fees with no excess. You can read more about how it works on our tax investigation insurance page. When you are ready, you can get a quote for tax investigation cover in a few minutes.

Reviewed by Matthew Bartlett, Director, Solar Protect. Last reviewed 29 September 2026. This guide is general information, not personalised tax or financial advice. Figures are correct for the 2025/26 and 2026/27 UK tax years at the time of writing.