Business Premises Renovation Allowance

Originally introduced by the Finance Act 2005, in the recent budget it was announced that Business Premises Renovation Allowance would be extended for a further 5 years to 11 April 2017. But what exactly is BPRA and how can it be of relevance to you? The aim of BPRA is to encourage investment in unused commercial property located in certain areas throughout the UK.  An unfortunate consequence of the recent recession is the rise in number of empty commercial properties on both the high street and industrial estates. Thus when considering an investment in commercial property, either for use in a trade, professional or vocation or by a property investor, the availability of BPRA may be a worthy consideration.

Where a person (individual or company) incurs qualifying expenditure on a qualifying building they are entitled to an initial allowance of 100% of the qualifying expenditure. If the initial allowance is not claimed in full an annual writing down allowance of 25% can be claimed. If there is a balancing event, typical sale of the property, cessation of business use or grant of a long lease, within 7 years of first use of the property a balancing adjustment arises. Depending on the circumstances this can result in further allowances or a clawback of allowances previously claimed.

Qualifying expenditure
Qualifying expenditure is defined as capital expenditure on

• converting a qualifying building into qualifying business premises, or
• renovating a qualifying building that is, or will be, qualifying business premises, or
• repairs to qualifying business premises.

Qualifying business premises are premises used, or available for letting for use, for a trade, profession or vocation or as offices. There are some exceptions to this.

Note that expenditure on acquiring the land, extending the qualifying building or developing land next to the qualifying building will not qualify for BPRA.

Qualifying building
A qualifying building is an unused commercial building or structure or part of an unused commercial building or structure. The building must have been unused for a year immediately before the conversion or renovation began. The last use must not have been as a dwelling.

One of the conditions is that the building must be unused for a year before conversion or renovation begins. So for example if a person acquires an interest in a qualifying building which has been unused for 9 months, delaying renovation works for 3 months could potentially mean BPRA can be claimed. But warning, relatively small scale activities may be deemed to be the commencement of conversion/renovation so care needs to be taken in identifying, or delaying if the case may be, the date of commencement.

The qualifying building must be located in a disadvantaged area. These are areas specified as development areas by the Assisted Areas Order 2007 (SI 2007/107). A list can be found at http://www.legislation.gov.uk/uksi/2007/107/pdfs/uksi_20070107_en.pdf