Executive summary

This note is supplementary to the Structures and Buildings Allowances (SBA) briefing published on in November 2025. Experience suggests that there is still considerable inconsistency in the way that qualifying SBA expenditure is recorded and claimed and how the relevant SBA information is passed onto subsequent purchasers. Most notable is the inconsistent approach to the treatment of post first use expenditure.

This briefing sets out the statutory basis for claiming SBAs on post first use expenditure and provides examples of the various options available for claiming SBAs on that expenditure.  All legislative references are to the Capital Allowances Act 2001, unless stated.

Example assumptions

The options available are explained with reference to an example, the details of which are as follows:

• A company has a 12-month accounting period ending 31st December.
• The building was brought into a non-residential use on 30th June 25 and the SBA amount was £10m.
• There were some further payments and retention monies paid:
  • 5 invoices totalling £150k paid between 1st July 25 and 31st December 25 with the last one paid on 1st December 25.
  • 2 further invoices were paid in the December 26 period for £50k with the last one paid on 1st November 26.

Statutory basis for determining treatment of post- first use expenditure

All post first year expenditure must have a deemed date to determine when it is treated as being incurred for the purposes of claiming SBAs. That deemed date is determined with reference to s.270BB where three options can be found.

Option 1: s.270BB(3)(a) – on the latest day on which the qualifying capital expenditure on the construction is incurred.

• Sub-option 1: group the 7 invoices across the two years together and claim £200k from 1st November 26. This will result in an allowance of 3% x 2/12 x £200k.
• Sub-option 2: claim £150k in the December 25 period from the 1st December 25 resulting in an SBA of 3% x 1/12 x £150; and then claim the £50k in the Dec-26 period from the 1st November 26 resulting in an SBA of 3% x 2/12 x £50k.

Option 2: s.270BB(3)(b) – on the first day of the chargeable period following the period in which the day mentioned in para (a) falls.

• Sub-option 1: group the 7 invoices across the two years together and claim £200k from 1st January 27. This will result in an allowance of 3% x £200k in that period.
• Sub-option 2: claim £150k in the Dec-26 period from the 1st January 26 resulting in an SBA of 3% x £150 in that period; and then claim the £50k in the December 27 period from the 1st January 27 resulting in an SBA of 3% x £50k.

Option 3: s.270BB(3)(c) – on the first day of the chargeable period following the period in which the day on which the expenditure is incurred falls.

The only sub-option here is to group all the expenditure together in any single year and claim it from the 1st day of the following period.  So, it is the same as Option 2 in 3b.

• Claim £150k in the December 26 period from the 1st January 26 resulting in an SBA of 3% x £150 in that period and then claim the £50k in the December 27 period from the 1st January 27 resulting in an SBA of 3% x £50k.

Effectively, (a) and (b) allows you to group multi-year expenditure together and claim on either the latest invoice date or the 1st day of the following accounting period.  Whereas with 3(c) the default is just to claim all the SBA expenditure incurred in a period from the 1st day of the subsequent period.

Why is pre- and post first use expenditure apportioned?

The reason why you need to apportion the 3% annual allowance based on the percentage of time between the date of first use or the deemed expenditure incurred date, and the year end, is because every SBA only has 33 1/3rd years to run.  If, in the example given you claimed 3% on the £150k expenditure in the Dec 25 period then you are effectively claiming 33 1/3rd plus 10/12ths worth of SBAs.

The rules that require the apportionment are contained in 270AA(2) and 270EA(3).

270AA(2) – A person is entitled to an allowance, in relation to a qualifying activity, for a chargeable period if

(a) In respect of any day during that chargeable period –

1.  The person has the relevant interest in the building or structure in relation to the qualifying expenditure, and
2. The building or structure is in non-residential use; and

(b) – the beginning of that day falls

On or after the later of the day on which the building or structure is first brought into qualifying use by the person and the day on which the qualifying expenditure is incurred (in either case, whether the day is in the same or an earlier chargeable period), and

1. within the period of the length specified in subsection (2A) beginning with the later of the day on which the building or structure is first brought into non-residential use and the day on which the qualifying expenditure is incurred.

270BB(2A) – The length of the period referred to in subsection (2)(b)(ii) is

•  in the case of special tax site qualifying expenditure, 10 years, and
• in the case of other qualifying expenditure, 33 1/3 years.

270EA(3) If –

• the conditions in section 270AA(2)(a) and (b)(i) are met on some, but not all, days during the chargeable period,
• the period mentioned in section 270AA(2)(b)(ii) expires part way through the chargeable period, or
• entitlement to the allowance ceases under section 270AA(4) on any day during the chargeable period, the allowance is proportionately reduced.

So, using our example again, the clauses above will need to be assessed based on the deemed date of expenditure incurred determined by 270BB.  Given that 270BB (b) and (c) do not involve any part year SBAs, we only need to consider (a).  If option 1 is adopted, then the references to “the day on which qualifying expenditure is incurred” will be 1st November 26.

We know the date of first use was June 25.  The “day” in both 2b(i) and (ii) will therefore be 1st November 26.  For apportionment not to apply, the test in 270EA(3)(a) would need to apply on every day of the year. However, the test is not met on any day prior to 1st November 26.  For example, if the day selected in 270AA(2)(a) was say, 31st October 26, then, applying the two tests in 270AA(2)(b), you would need to ask if 31st October is after the 1st November which it isn’t and wouldn’t be for any earlier date. So, the test is only true for dates afterwards meaning you can only claim the SBA for 2 of the 12 months.

In practice

SBA management is not straightforward and, in our view, requires a disproportionate amount of administration for what is ultimately only a cash flow benefit due to TCGA92 s.37B(2) requiring the consideration received on disposal to be increased by the cumulative amount of SBAs claimed during ownership to be added to the sale proceeds, even if you sell at a loss.

For example, it is quite possible to have multiple SBA commencement dates on one property, particularly in multi-tenanted buildings with different lease commencement dates. Also, how do you apportion capital expenditure incurred in common areas and structures such as estate roads in, or associated with, those buildings or do they have an SBA start date of their own? And how do you keep track of SBA records and the potential impact of TCGA92 s.37B when looking at contingent gain calculations?  Can you also easily pull together all the relevant SBA statements to hand on to a purchaser of the building particularly if the expenditure could have been incurred many years in the past. This will only get administratively more burdensome as time passes.

How we can help

Record keeping is essential.  At TFI Group we not only ensure all qualifying SBA expenditure is accurately recorded but we can also document that qualifying expenditure, along with all other allowances and capital expenditure base cost records on our Capital Assets Database platform which not only retains all records but, far more importantly, supports disposal calculations including the impact of SBA claw backs and allows you to manage the multitude of tax considerations associated with capital tax management.

Author: Sam Moore