The structures and buildings allowance is the capital allowance for the building structure itself, and it may be claimed each year on certain money spent on the purchase, construction or renovation of a structure that is used for a qualifying activity. The rate is 3% a year from 1 April 2020 for Corporation Tax and from 6 April 2020 for Income Tax, and the allowance period ends 33 and one third years after its start date. [1] Land, integral features and fixtures included in the price, planning permission, financing, public enquiries or legal expenses, and landscaping cannot be claimed under it.
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How capital allowances on buildings work
The allowance for the building structure itself is the structures and buildings allowance, which may be claimed each year on certain money spent on the purchase, construction or renovation of a structure. The rate is 3% a year from 1 April 2020 for Corporation Tax and from 6 April 2020 for Income Tax. [1]
Plant and machinery inside a building is a separate category, and costs that also qualify for plant and machinery allowances cannot be claimed under the structures and buildings allowance. Whether a property may support capital allowance claims could depend on how the spending splits between the structure and what is installed in it.
What qualifies as a capital allowance on a building?
A structure may qualify for the allowance if it meets all of these conditions:.
- the claimant has paid some or all of the costs towards the purchase, construction or renovation of the structure
- all construction contracts were signed on or after 29 October 2018
- the structure was not used as a residence the first time it was used or during the period claimed for
- the structure is used for a qualifying activity
- the structure has an allowance statement
Qualifying activities are taxable in the UK and are trades, professions and vocations; a UK or overseas property business, except for residential and furnished holiday lettings; managing the investments of a company; and mining, quarrying, fishing and other land-based trades such as running railways and toll roads.
The claim is limited to construction costs, which include fees for design, preparing the site for construction, construction works, renovation, repair and conversion costs, and fitting out works. A business that builds or renovates a structure can claim on the amount spent on construction costs, even if it leases the structure from somebody else. Where more than the market value was paid for a structure or its construction costs, only the original market value can be claimed.
The guide to the Annual Investment Allowance covers the separate allowance for plant and machinery.
Buying a building: which cost the allowance uses
When a business buys a structure rather than building it, the amount it can claim on depends on who sold it and whether it had been used:
- Unused, bought from a developer: the price paid to the developer, after deducting items that cannot be claimed for.
- Sold by a developer, sold more than once, and the buyer is the first person to use it: the lower of the price paid to the developer when they sold it and the price the buyer paid.
- Used, bought from a developer: the developer's construction costs.
- Unused, bought from somebody who is not a developer: after deducting items that cannot be claimed for, the lower of the price paid for the structure and the original construction cost.
- Used, bought from somebody who is not a developer: the same amount that the previous owner was entitled to claim.
If any previous owner was able to claim a research and development allowance, the buyer can claim for what is left of the allowance period, but cannot claim more than the amount paid for the structure.
Costs and items the allowance leaves out
The structures and buildings allowance cannot be claimed on costs:
- for any residence or any structure located in the grounds of a residence
- which also qualify for plant and machinery allowances
- already used to claim another allowance
- for other items included in the price of the structure, such as land, integral features and fixtures
- for planning permission
- for financing, such as loans
- for public enquiries or legal expenses
- for landscaping or land reclamation
- for which a grant or contribution was received
Things installed in a building to make it usable are background plant or machinery, which include, but are not limited to, lighting, wiring and central heating, and a business that leases out commercial property may be able to claim for background plant or machinery in the leased buildings. [2]
What are the rules for claiming allowances on a building?
The structures and buildings allowance is claimed on the tax return, and an allowance statement is needed for the structure. The first person to use the structure must create a written allowance statement before making a claim, and the statement must include:
- information to identify the structure, such as address and description
- the date of the earliest written contract for construction
- the total qualifying costs
- the date non-residential use of the structure began
A buyer of a used structure can only claim the allowance if they get a copy of the allowance statement from a previous owner. Information about the earliest construction contracts needs to be kept in the records, and formal contracts, emails or board meeting notes can be used.
The claim starts from the later of the date the claimant started using the structure for a qualifying activity and the date the claimant is due to pay for the structure or construction. The allowance period is 33 and one third years from the later of the date the building is first used for a non-residential purpose and the date the qualifying expenditure is incurred. The allowance is adjusted if the accounting period is more or less than a year, if all conditions are not met on every day of the accounting period, if entitlement ends during the period, or if the structure is used for more than one activity.
If the structure is sold, demolished or used for anything other than a qualifying activity, the claim ends, and the total allowance claimed is added to the disposal receipts to calculate the capital gain or loss, which may mean more Capital Gains Tax or Corporation Tax to pay.
A claimant may also choose to group additional qualifying costs together and start the claim for those costs on the first day of the next accounting period.
What changed in 2026, and does it reach buildings?
The main rate of writing down allowance changed from 18% to 14% on 1 April 2026 for Corporation Tax and 6 April 2026 for Income Tax. [3] Where an accounting period includes the date the rate changed, a hybrid rate is worked out for that period, based on how much of the period falls before the change and how much after.
Writing down allowances belong to the plant and machinery rules, claimed through pools such as the special rate pool. That change concerns the main rate of writing down allowance, so it is relevant only to costs that fall under the plant and machinery rules, not to the structure itself. The structure itself falls under the structures and buildings allowance, whose own guidance gives a rate of 3% a year from 1 April 2020 for Corporation Tax and from 6 April 2020 for Income Tax.
The change to the main rate of writing down allowance does not change the structures and buildings allowance rate explained earlier.
Sources
Rates, thresholds and dates in this guide come from these sources. Check the source for the current figure.