Business Premises Renovation Allowance

by Ian Williams FCA TEP

Campbell Dallas Chartered Accountants

Business Premises Renovation Allowance (BPRA) has been introduced to provide 100% initial allowance for the cost of renovating or converting business property in designated areas. The qualifying expenditure must have been incurred on or after 11 April 2007 and it is envisaged the relief will be available for 5 years.

BPRA will provide an enhanced tax deduction rate for expenditure that would otherwise have qualified for plant and machinery capital allowances, and provide a new relief for expenditure on commercial buildings (such as offices and shops) that does not otherwise qualify for capital allowances. There is no clawback of the allowance if the building is held for 7 years after incurring the expenditure.

Main features

The scheme is available to individuals or companies.
The scheme is restricted to property that has been vacant for at least one year.
The allowance is available to the landlord or tenant who incurs capital expenditure on renovation or conversion in order to bring a building back into business use.
Allowances are available if a person incurs “qualifying expenditure” on “qualifying buildings”
The person incurring the expenditure must have a relevant interest in the property either freehold or leasehold.

Qualifying Building

There are three main conditions relating to the building itself that must be met:

The building must be situated in a disadvantaged area on the date when the conversion or renovation work began. Disadvantaged areas are detailed in the Assisted Areas Order 2007 which came into force on 13 February 2007. The areas are detailed at the following address www.opsi.gov.uk/si/si2007/20070107.htm
The building must have been vacant for a period of one year before renovation works commenced.
The building must have last been used for offices or for the purposes of a trade, profession or vocation and must not have been used as a dwelling.

Qualifying Expenditure

The expenditure must be on renovation works and be capital in nature. Where repair work is carried out that is incidental to the renovation work, this will also be treated as qualifying expenditure.

Any works carried out by a property developer with the intention of disposing of the property at a later date within the course of its trade will not qualify for BPRA as this is not capital expenditure. The relief is essentially available to a person who develops a property for retention and use in their own trade, profession or vocation or who retains the property for rental to a tenant using the property for a qualifying purpose.