• Structures and Buildings Allowance update

Structures and Buildings Allowance update

13 March 2019

Following the announcement in Budget 2018 of the introduction of a new Structures and Buildings Allowance, the Government today published draft secondary legislation for consultation. This draft legislation follows the initial consultation in respect of the Technical Note published at Budget 2018 that outlined the key features of the policy and consultation questions.

The main provisions of the Technical Note have been retained. Relief will be given at a rate of 2% per annum for expenditure on the construction of commercial property that does not qualify for capital allowances as either plant, machinery or integral features where all contracts for construction work on a project were entered into on or after 29 October 2018. The remaining benefit of the allowance will pass to any purchaser on a sale of the property.

Some technical elements of the policy design have changed following engagement with stakeholders so far in the consultation process.

Periods of disuse

The Government has stated that the structures and buildings allowance will still be given for periods during which property falls into disuse. The draft legislation, however, creates a degree of uncertainty in this area as it would seem to imply that a building or structure can be regarded as not being in qualifying use if the extent to which it is in use for a qualifying purpose is ‘insignificant’.


Originally, some complex rules were proposed for dealing with qualifying properties that were demolished. However, it is not now proposed to enact these on the basis that at the point of demolition any expenditure on which structures and buildings allowance has not been given would be taken into account as part of the base cost of the property in calculating the capital loss on disposal (by virtue of demolition).


Where leases are granted for periods of 35 years or more and the incoming tenant pays a substantial premium by reference to the value of the property, the benefit of the allowance in respect of expenditure incurred by the landlord will be given to the tenant during the period of the lease. It will then be treated as having been reacquired by the landlord on the expiry of the lease.

The original proposal was that where tenants incurred qualifying expenditure on the property comprised in their lease the benefit of the allowance would pass to their landlord on the expiry of the lease. This was despite the landlord never having incurred the expenditure. The draft legislation now provides that a lease is to be treated as continuing where it is renewed, extended or replaced thereby meaning that the tenant will retain the benefit of the allowance following expiry unless they receive a payment in connection with the lease either from the landlord or an incoming tenant.

Next steps

The Government invites views on the draft legislative detail by 11.45pm on 24 April 2019. Following this, an overall response to consultation responses will be published in May 2019 and the final published version of the legislation will be in the form of a Statutory Instrument expected in the summer.