CA92200 - Structures and buildings allowance (SBA): use: when qualifying use is ‘insignificant’

CAA01/S270CE(2)-(3)

Qualifying use is required before SBA can be claimed in respect of a building for the first time.

If the extent to which a building is first used is insignificant, it cannot be in ‘qualifying use’. This means that the building can only qualify for an allowance once it is brought into significant qualifying use.

The extent to which a building is used for the purposes of a qualifying activity is to be determined on a just and reasonable basis.

The word ‘insignificant’ is not defined, so it takes its ordinary English meaning. For example, the New Oxford English Dictionary defines it as, “too small or unimportant to be worth consideration”.

In the context of a building, insignificant use will most likely refer to the number of days of use for the qualifying activity out of the total available. However, it may be appropriate to consider the specific use in the context of the overall pattern of use of the building to decide whether or not that use was insignificant.

Note, that the significance of the use is only relevant when determining ‘qualifying use’. Other references in the SBA legislation to ‘use’ are absolute, for example, whether a building is sold before or after first use CA93000, or when the 33 1/3 year period in which entitlement to SBA may arise commences CA90100.

Example 1

A company with a chargeable period ending 31 December 2020 finishes construction of a warehouse for use in its trade on 31 January 2020 but does not bring it into the planned use for the purposes of the qualifying activity during 2020. It does make use of the building for 2 days in April to temporarily store goods in transit between other properties, but otherwise makes no use of the warehouse. On the basis that two days’ use across the 11 months is insignificant, even though the use was non-residential, the building has not been brought into qualifying use, and so entitlement to SBA does not arise during the 2020 chargeable period.

Example 2

Following problems with vandalism of other vacant buildings nearby, the company in Example 1 decides that it would be better for the warehouse to be occupied. It therefore lets a local community club use the space free of charge from May to December 2020. The building is in non-residential use for over half the year, but only the two days in April were use for the purposes of the qualifying activity. Because the use for the purposes of the qualifying activity was insignificant, when considering the pattern of use across the chargeable period, there was no qualifying use, and no entitlement to SBA. Note that the 33 1/3 year period for the SBA starts from April 2020, when the building first comes into non-residential use.

Example 3

If the warehouse in Example 1 was not completed until late in December 2020, only 2 days of use in the days remaining before 31 December 2020 might not be insignificant if the warehouse continues to be in significant use in 2021.