CA93110 - Structures and buildings allowance (SBA): qualifying expenditure: expenditure on construction or acquisition: expenditure on construction of a building

CAA01/S270BL

SBA is given on capital expenditure incurred on the construction, conversion or renovation of a building, or the apportioned cost of buying an unused building.  For the date when expenditure is incurred see CA11800.

Acquisition expenditure

The total price paid for the freehold of a building must be apportioned as only the capital sum paid for the building itself (and not the land) will qualify for SBA.  This capital sum may include a few specific items CA93500.

Construction expenditure

Expenditure treated as incurred on the construction of a building includes:

  • professional fees relating to the design and construction of a building provided that the building is actually constructed
  • costs incurred in preparing the site for construction (includes the cost of demolishing any existing structure or building) CA93250
  • construction costs of the building CA93410
  • capital renovation and conversion costs
  • capital fitting out worksCA93450
  • capital repairs, that is any repairs which are incidental to capital renovation or conversion CA93200 for which the cost is not available as a deduction in computing the profits of the qualifying activity.

Expenditure on the construction, conversion or renovation of a building does not include:

  • the cost of the land or rights over the land CA94010
  • the cost of obtaining planning permission CA94100
  • financing costs
  • capitalised interest
  • the cost of a public enquiry
  • the cost of land remediation, drainage and reclamation CA94010
  • landscaping
  • legal expenses
  • marketing, promotion, agency or arrangement costs associated with the legal transfer of a relevant interest.
  • costs associated with the acquisition of franchise rights or intellectual property.

Apportionment of expenditure

Where expenditure falls to be apportioned between qualifying and non-qualifying expenditure, such as between a building and the land it sits on or within, the apportionment is to be made on a just and reasonable basis.

You should also make a just and reasonable apportionment where the purchase price of a building includes other assets on which another type of capital allowance is claimed, such as plant or machinery fixtures where plant and machinery allowances (‘P&M’) have been, or could be, claimed CA94300.

Abortive Expenditure

A person may incur costs on items such as architect’s fees but then decide not to build the building designed by the architect. That is not expenditure on the construction of a building because no building is constructed and so it does not qualify for SBA.

Contributions and Subsidies

Expenditure does not qualify for the SBA if it is met, or is to be met, directly or indirectly by someone else [ ]. Where a contribution is made, the qualifying expenditure incurred by the person with the relevant interest is reduced by the amount of contribution they receive and the contributor may be entitled to SBA on the amount of the contribution, by way of the contributions allowance provisions [ ], provided all other conditions for relief are met.