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Even experienced accountants can fall into a costly trap with Structures and Buildings Allowance (SBA). SBA provides tax relief on qualifying non-residential construction costs at 3% per year. However, once claimed, it cannot be reversed. Misclassifying plant and machinery as SBA can permanently deny clients access to 100% First Year Allowances, such as Annual Investment Allowance (AIA), Full Expensing, and the 50% First Year Allowance.

We have seen first-hand how the incorrect use of SBA has negatively impacted top accountancy firms, with a number of their clients currently deciding whether to test their accountant’s PI policy!

If SBA is claimed and checks are subsequently made to verify whether the correct treatment was made, errors can be easily identified (in most cases); however, corrections are not possible if the window for amendment is closed.

This article highlights common pitfalls, explains the legislative framework, and provides guidance on protecting you and your clients from avoidable losses.

What is Structures and Buildings Allowance (SBA)?

Introduced in October 2018, SBA allows businesses to claim relief on qualifying non-residential construction or renovation costs. The rate is 3% per year (from April 2020), applied over 33 and one third years. Eligible projects include offices, factories, warehouses, shops, and certain agricultural buildings (essentially, commercial property).

The key qualifying criteria are:

• Construction must be new or involve structural work
• Contract for work must be signed on or after 29 October 2018
• Used for a trading or property business
• The client must hold an interest in the property

SBA is much slower and less flexible than other capital allowances.

Can SBA Expenditure Be Reclassified? Understanding the Permanent Nature of SBA Claims

Once an expenditure is allocated to SBA, it cannot be reclassified for other allowances, even if a review later identifies more generous relief options. This is unless the window is still open for tax return amendments. Where amendments can still be made, reclassification can take place.

Structures and Buildings Allowance vs Plant and Machinery: Key Differences

Many Structures and Buildings Allowance errors arise from incorrectly categorising construction expenditure that should instead qualify for plant and machinery capital allowances on construction costs.

Plant and machinery generally includes:

• Moveable fixtures and fittings
• Equipment with a functional business purpose
• Integral features such as heating, cooling, electrical work, water systems, lifts, and escalators

Essentially, careful consideration should be given to any systems and installations that form part of the structure of a commercial property which need separating for tax purposes.

Structures and buildings include:

• Walls, floors, roofs, and staircases
• Permanent fixtures forming part of the building fabric

Understanding these distinctions is critical to preventing clients from claiming 3% SBA on assets that qualify for 100% relief.

For a deeper explanation of qualifying assets, see Capital Allowance Review Services’ guide on plant and machinery capital allowances.

Case Study: How a Campsite Lost Thousands Through Incorrect Structures and Buildings Allowance Claims

This client spent £649,954 developing campsite facilities over three years. The project included electrical systems, bathrooms, kitchens, shower panels, joinery, and building works from multiple contractors.

Their accountant, from a top 20 firm, applied SBA to £570,434. Relief at 3% equated to £17,113 per year, with only £11,780 claimed as 100% relief in 2024, deferring most of the relief for decades.

Missed Qualifying Plant and Machinery Expenditure

A review of the expenditure revealed numerous items included in the £570,434 SBA claim that should have qualified for 100% capital allowances through AIA or Full Expensing.

Obvious qualifying plant and machinery items included:

• Electrical installations £7,682
• Bathroom fixtures £806
• Kitchen worktops £3,822
• Shower panels £2,470

Total: £14,780

The real opportunity was in the substantial building contracts that were never properly surveyed:

• Main contractor £224,000 – likely includes electrical, plumbing, heating
• Secondary contractor £17,000 – potential qualifying equipment
• Joinery £22,000 – fitted fixtures and functional items

A specialist capital allowance survey could have identified between £150,000 and £250,000 of qualifying plant and machinery expenditure within the construction costs, securing 100% upfront relief rather than locking the client into SBA.

Financial Consequences for the Client

Assuming £150,000 of qualifying expenditure could have been identified, this is what the situation looks like:

The client lost tens of thousands in immediate tax relief and the ability to reinvest in their business because the expenditure was not allocated correctly. This is a situation that arises frequently; it’s an important point to consider.

The difference in value between the two allowances also indicates the risk that accountancy firms could be exposed to where a client chooses to take action.

Common Structures and Buildings Allowance Mistakes Made by Accountants

Capital allowances are a highly specialised area. Even top-tier firms can misclassify expenditure due to:

• Complexity in distinguishing plant from building fabric
• Reliance on invoices without a detailed survey of construction costs
• Lack of awareness of evolving reliefs such as full expensing

The main reason for good accountants falling short in this area is the limitations of invoices and not having the surveying & valuation disciplines to fully understand the costs incurred by clients.

Failing to identify qualifying assets can result in professional negligence exposure and long-term client dissatisfaction.

Best Practice for Claiming Structures and Buildings Allowance Correctly

• Engage an experienced & reputable capital allowance specialist such as the Capital Allowance Review Service.
• Draft them in for internal discussions with you and your teams when clients have or are considering property investment. This enables proactive technical conversations to take place, ensuring the best approach is taken.
• Ensure a survey of all construction expenditure is completed to identify qualifying plant and machinery
• Review invoices, contracts, and project details before making SBA claims and lean on the Capital Allowance Review Service when appropriate.
• Educate clients on the importance of informing you before capital is spent so the best advice can be given, and the best actions can be taken.

Best practice is to instil a simple trigger into your processes. Where a client has capital spending by buying, building, or improving commercial property, the Capital Allowance Review Service should be called.

Our partners, Capital Allowance Review Service, are the go-to firm to help you with all these areas.

The cost of expert advice is minimal compared to the potential financial and reputational damage of locking clients into unoptimised tax relief.

Structures and Buildings Allowance FAQs

Can Structures and Buildings Allowance be changed once claimed?

Only in an open tax return. Once expenditure is allocated to Structures and Buildings Allowance, it cannot be reclassified for plant and machinery allowances, even if a later review identifies qualifying assets.

What qualifies for Structures and Buildings Allowance?

SBA applies to qualifying non-residential construction and renovation costs, including offices, factories, warehouses, shops, and certain agricultural buildings, e.g., commercial property, provided the work began after 29 October 2018.

What is the difference between SBA and plant and machinery allowances?

SBA provides relief at 3% per year over 33 and one third years, whereas plant and machinery allowances, such as AIA and Full Expensing, can provide 100% tax relief in the year of purchase.

Should accountants use a capital allowance specialist for SBA claims?

Yes. A specialist capital allowance survey ensures construction costs are correctly analysed so that qualifying plant and machinery expenditure is not mistakenly allocated to SBA.

To avoid costly Structures and Buildings Allowance mistakes and maximise capital allowances on construction projects, speak to a specialist capital allowance surveyor. Find out more about the Capital Allowance Review Service or contact our capital allowance experts today for a review of your client’s construction project.