How does section 37B of TCGA 1992 claw back structures and buildings allowances on disposal?

When a person disposes of an interest in a building or structure on which they have claimed structures and buildings allowances, section 37B increases the disposal consideration by the total SBAs claimed. This effectively adds back the tax relief obtained, resulting in a larger chargeable gain on disposal and recapturing the benefit of those allowances.

What happens to the SBA clawback on a no gain/no loss transfer or roll-over relief?

On no gain/no loss disposals, roll-over relief on business transfers, or deemed disposals on leaving the REIT regime, the clawback is deferred. The allowances previously claimed by the transferor are attributed to the transferee instead. The clawback then applies when the transferee eventually disposes of the asset outside these categories.

How does the SBA clawback apply to wasting leasehold interests under section 37B?

Where the asset is a leasehold interest of 35 years or more treated as a wasting asset, the SBA amount added back to consideration is written down over the remaining life of the lease. The same depreciation curve from Schedule 8 that applies to allowable expenditure on wasting leasehold interests is used, preventing an unfairly large clawback.

Are contribution allowances subject to the SBA clawback under section 37B?

Yes. Contribution allowances — structures and buildings allowances claimed where a person made a capital contribution towards another person's qualifying expenditure on a building or structure — are treated in the same way as directly claimed SBAs. They are therefore subject to the same clawback rules on disposal under section 37B.

Taxation of Chargeable Gains Act 1992 section 37B

Consideration on certain disposals: structures and buildings allowances

Section 37B requires that when a person disposes of an interest in a building or structure and has previously claimed structures and buildings allowances on that asset, the disposal consideration must be increased by the amount of those allowances for the purpose of computing any chargeable gain.

When a person disposes of an interest in a building or structure (whether in the UK or overseas) on which they have claimed structures and buildings allowances, the disposal consideration is increased by the total allowances claimed, effectively clawing back the tax relief on disposal.
Where the disposal is on a no gain/no loss basis, qualifies for roll-over relief on transfer of a business, or is a deemed disposal on leaving the REIT regime, the allowances previously claimed by the transferor are treated as having been claimed by the transferee, so the clawback is deferred until the transferee eventually disposes of the asset.
Where only part of the asset qualifies for capital allowances (for example, where wasting asset rules require apportionment), the increase in consideration applies only in the same proportion as the expenditure qualifying for capital allowances.
Where the asset is a leasehold interest of 35 years or more that is treated as a wasting asset, the amount added to the consideration is reduced over the life of the lease in the same way that allowable expenditure is written off for wasting assets under Schedule 8.

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