Business Premises Renovation Allowance ('BPRA'): Budget 2011

What changes has the Budget made to BPRA?

In the Budget, George Osborne announced that BPRA is being extended for a further five years from its original expiry date of 11 April 2012. Therefore we expect it now to be available in respect of any expenditure incurred before 11 April 2017.

What is BPRA?

BPRA is a capital allowances scheme for the conversion or renovation of unused buildings in disadvantaged areas. Expenditure must be incurred on or after 11 April 2007 and, as a result of the Budget, before 11 April 2017 to qualify. The initial allowance is equal to 100% of the qualifying expenditure incurred in the first year. If the initial allowance is not claimed in full or at all in the first year, writing down allowances can be claimed at the annual rate of 25% on a straight line basis. If within 7 years of the first use of the building after conversion or renovation there is a balancing event (including the sale of the property or the grant of a long lease for a premium) then there will be a balancing adjustment. A balancing adjustment is a balancing charge or a balancing allowance in relation to capital allowances. Effectively this may result in a clawback of these allowances.

Why have BPRA?

BPRA is a scheme which is designed to act as an incentive to bring derelict or unused properties back into business use. It is to encourage economic and social regeneration in disadvantaged areas. BPRA is also used to attract high net worth individual investors by entitling them to set off any loss arising as a result of the claim for BPRA against their general income thereby achieving tax relief for the qualifying expenditure at a rate of 50% by being members of a limited liability partnership ("LLP") which incurs the qualifying expenditure. Due to the clawback of capital allowances detailed above, it is recommended there is a minimum investment time of 7 years post renovation or conversion.

When is BPRA available?

A person must incur qualifying expenditure in order to claim BPRA. Qualifying expenditure is capital expenditure on:

converting a qualifying building into qualifying business premises; or renovating a qualifying building that is, or will be, qualifying business premises; repairs to qualifying business premises Qualifying expenditure does not include expenditure on acquiring the land, extending a qualifying building or developing land next to a qualifying building. A qualifying building is a commercial building (not last used as a...