Business premises renovation allowance

The concept of Business Premises Renovation Allowances (BPRA’s) was first introduced in the Finance Act 2005 but did not come into effect until 11 April 2007.  The scheme originally had a life of five years but this was extended for another five years in the 2011 Budget to 2017.

A condition of this extension, however, is that a BPRA limit of €20m per project is now applied. Careful planning is, therefore, required to ensure anything over this limit is claimed under another qualifying heading wherever possible.

The initiative is designed to offer a significant tax incentive for bringing back into use derelict or unused properties within approximately 2000 specified disadvantaged areas.

A disadvantaged area is one set out in the Assisted Areas Order 2014/1508. There is a useful post code checker which can be found at;

http://www.bis.gov.uk/analysis/statistics/sub-national-statistics/assisted-area-look-up

Qualifying expenditure is that involved in converting, renovating or repairing a commercial building in a disadvantaged area that has been unused for at least a year. The last use cannot have been as a dwelling.

Similarly, extending a building or developing land next to a qualifying building does not qualify for BPRA’s.

Qualifying business premises are those used, or more importantly available for use, in a trade, profession, vocation or as offices.

It should be noted that BPRA’s are not given on buildings used for the following activities;

  • fisheries and aquaculture (fish farming),
  • shipbuilding,
  • the coal industry,
  • the steel industry,
  • synthetic fibres,
  • the primary production of certain agricultural products, and
  • the manufacture or marketing of products which imitate or substitute for milk and milk products.

 

There is an initial allowance of 100% of the qualifying expenditure. If the initial allowance is not claimed in full, then a 25% writing down allowance is given on a straight line basis.

The allowances may only be claimed by the person who incurred qualifying expenditure and has the relevant interest in the qualifying building. This means that BPRA’s are only available to the person who undertakes the conversion or renovation works. It does mean, however, that more than one person can have a claim entitlement on the same building.

Additionally, the legislation applies to part of a building in exactly the same way as it does to a whole building. As such, a claim can be made on any part of a building that meets the qualifying criteria even if the entire property does not.

Any unrecovered VAT on qualifying works can also be added to the BPRA claim. Conversely, if a grant or subsidy is received, then this has to be netted off the qualifying expenditure

BPRA’s are not available to the purchaser of a property that has already been converted or renovated, even if that property would have qualified had the purchaser undertaken the works.

It is though possible to structure a proposed development so the BPRA’s are available to a potential owner. This aspect has become popular with syndicated collective investment schemes – although some of these schemes should come with a health warning as there is a fine line between those that are structured correctly and those that fail on relatively simple technicalities and so the BPRA’s are denied.

Finally, if the property is sold or a long lease granted within five years (seven years for expenditure incurred prior to April 2012) of the first use of the building, or the building becoming available for use, after conversion or renovation then there is a balancing adjustment which could result in some or all of the allowances being clawed back.

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