CA91400 - Structures and buildings allowance (SBA): allowances: proportional adjustment to an allowance

CAA01/S270EA

In the following circumstances, the amount of SBA must be adjusted proportionally if:

  • the chargeable period is more or less than one year; for example, if the chargeable period is 15 months the amount of the allowance is increased by fifteen-twelfths
  • the building is first brought into qualifying use CA92100 by a person part-way through a chargeable period
  • the building is in (or treated as being in CA92900) non-residential use for some, but not all, days in a chargeable period CA90100
  • the person has the relevant interest in the building for some, but not all, days in a chargeable period CA90100
  • entitlement to SBA ceases because the building is demolished on any day during the chargeable period CA91500
  • entitlement to SBA ceases part-way through a chargeable period because the 33 1/3 year period ends.

The legislation makes reference to days but a reasonable adjustment by reference to months in the period may be acceptable, provided it is used consistently throughout the period of ownership.

Example

Mark trades as a pharmacist and builds a new shop after entering into a contract with a builder for £500,000 on 1 November 2020. The shop is completed on 31 December 2020 and brought into use on 1 January 2021. Mark draws up accounts each year to 31 March.

During the chargeable period to 31 March 2021, Mark has brought the shop into qualifying use and creates an allowance statement using his builder’s invoices so he can claim the SBA for the first time. Mark’s allowance is £500,000 × 3% × (90 days ÷ 365 days) = £3,699.

For the chargeable periods to 31 March 2022, 2023, 2024, 2025 and 2026, Mark’s allowance in each period is £500,000 × 3% = £15,000.

On 12 April 2026 Mark sells the shop to Jane who uses it in her food testing consultancy. Jane buys the building from Mark for £600,000, brings it into qualifying use on 13 April, and incurs an additional £100,000 on specialist fit out costs for her testing laboratory.

For Mark’s chargeable period to 31 March 2027, he can claim £500,000 × 3% × (12 days ÷ 365 days) = £494.

Jane makes up accounts to 30 June each year. In her chargeable period to 30 June 2026 she can claim £500,000 × 3% × (79 days ÷ 365 days) = £3,247.

For Jane’s chargeable period to 30 June 2027, she can claim the annual amount of £500,000 × 3 % = £15,000.

Note that the price Jane pays for the building does not affect the amount of the SBA she can claim.

Jane’s additional fit out costs may qualify for the SBA, to the extent that the costs do not relate to the provision of plant, as a new SBA claim for a new 33 1/3 year period starting from the day the laboratory comes into use. Jane must create a new allowance statement or add to the existing one to show clearly the amount of her new qualifying expenditure, the date it was incurred and the date the new assets came into use.