Business Property Renovation Allowances


Finance Act 2005 introduced a new capital allowance – Business Property Renovation Allowance (BPRA) which has been effective for expenditure incurred on or after 11 April 2007. BPRA is available for capital expenditure on converting, renovating or repairing and bringing back into use certain commercial buildings or structures that have fallen into disuse. The allowances available (subject to a claim being made) are an initial allowance of up to 100%, with an annual straight line writing down allowance of up to 25% of the qualifying expenditure on any remaining balance. The allowance is only available in certain areas. It was initially available only for a five year period to 10 April 2012, but the Government confirmed at publication of Finance Bill 2011 that the scheme would be extended for a further five years. Therefore in order to claim an allowance under BPRA, the expenditure must be incurred before 11 April 2017. It is available whether or not the person incurring the expenditure is carrying on a trade or property business.

Where the circumstances mean that BPRA could be available, then it may be worth considering the cashflow impact of waiting until a building meets the conditions for a claim for BPRA (for example by waiting until it has been unused for at least 12 months) before incurring the expenditure. In this way it may be possible to obtain 100% relief for expenditure which otherwise might not qualify for allowances (for example if not plant or machinery), or might only qualify for relief at a reduced rate applicable to 'special rate pool' expenditure.

Conditions for claiming BPRA

Allowances are available to a person incurring qualifying expenditure on a qualifying building in which they have a relevant interest.

Qualifying Expenditure

Qualifying expenditure is capital expenditure incurred on or after 11 April 2007 and before 11 April 2017 on the following:

converting a qualifying building into qualifying business premises; renovating a qualifying building if it is or will be qualifying business premises; repairing a qualifying building to the extent that such expenditure is incidental to the conversion or renovation described above. Expenditure cannot qualify if it is incurred in connection with the acquisition of land or rights over land, the extension of a qualifying building (with limited exceptions), the development of land adjacent to or adjoining a qualifying building, or the provision of plant or machinery unless it becomes a fixture. Practice has developed around determining whether repair expenditure is capital or revenue for tax purposes (the accounting treatment is not definitive for tax), and the concepts of 'entirety' and 'nearest modern equivalent' are often referred to. Where repair expenditure otherwise meets the conditions, it is treated as qualifying for BPRA as capital expenditure, provided it would not be allowable as a deduction in computing profits for tax of a property business, or of a trade, profession or vocation. Thus repair expenditure classified as revenue expenditure for tax purposes would not attract BPRA (for example deferred revenue expenditure included in fixed assets in company financial statements and depreciated).

If expenditure has been funded by a relevant grant or payment (i.e. through notified state aid or other payment specified by HM Treasury for the...

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