CA93650 - Structures and buildings allowance (SBA): qualifying expenditure: qualifying capital expenditure: qualifying capital expenditure on purchase of unused building from a developer

CAA01/S270BD, S270BL(1)

A building constructed by a property developer CA93600 may be transferred several times before it is brought into use for the first time.

Building bought unused from a developer – only one sale before first use

If a capital sum is paid for the relevant interest in an unused building, and that is the only sale before the building is first used, the qualifying capital expenditure is the capital sum paid to the developer for the relevant interest.

Note that this capital sum must be apportioned on a just and reasonable basis to calculate the qualifying capital expenditure CA93550.

Building bought unused from a developer – more than one sale before first use

If the sale of the relevant interest in an unused building is not the only sale before the building is brought into use, and a capital sum is paid on the last sale before the building is first used, the qualifying capital expenditure is the lesser of either:

• the capital sum paid for the relevant interest on its sale by the developer
• the capital sum paid for the relevant interest on the last sale before the building is first used.

Note that these capital sums must be apportioned on a just and reasonable basis to calculate the qualifying capital expenditure, see CA93550.

Building bought unused from a developer – when qualifying expenditure treated as incurred

The qualifying expenditure is treated as incurred on the date the capital sum is paid to acquire the relevant interest before the building is first used.

Example

In this example, the capital sums are the amounts after costs relating to land and other non-qualifying items are excluded.

Dave is a property developer. He constructs a building at a cost of £750,000 that he sells to Robin for £1 million. Robin does not bring it into use but sells it to George for £1,100,000. George finds that the building does not have the planning permission needed for his intended use and so he sells it unused to Tina for a capital sum of £950,000, who brings the building into use.

Tina’s qualifying capital expenditure is £950,000, the lower of the £950,000 Tina paid to George and the £1 million paid by Robin to Dave, the developer.

The price George paid to Robin is ignored and so is Dave’s construction cost.

Remember, in all cases the capital sum must be apportioned between the costs of the building and the land CA94010 and other excluded items on a just and reasonable basis CA93550 because not everything included in the capital sum paid for the relevant interest in the building qualifies for SBA.