Business Premises Renovation Allowance (BPRA) is designed to encourage conversion and renovation of empty business properties in specified 'assisted areas'. BPRA provides a 100% tax relief to property owners on money spent on conversion or renovation works on a building. The relief is available to individuals and partnerships as well as companies.
BPRA was originally intended to come to an end in April 2012 but has been extended to 31 March 2017 for corporation tax purposes and 5 April 2017 for income tax purposes. When the relief was extended some further changes had to be made to ensure that it continued to comply with European Commission State Aid rules.
Empty buildings that qualify for relief
The building, or part of a building, must be in an area that qualifies for relief (an assisted area) when the expenditure is incurred. The current list of assisted areas is due to expire on 31 December 2013. The Department for Business, Innovation and Skills is in discussions with the European Commission as to the assisted areas after 2013, but it is not yet known what these will be.
The building must have been empty for at least a year before renovation works begin. It must have been last used as an office or for the purposes of a trade, profession or vocation to qualify for relief, and must not have been used as a dwelling.
Tax relief will not be given if the building does not remain a business premises after the renovation works have been completed.
Premises used for fisheries and aquaculture, shipbuilding, coal or steel industry, synthetic fibres or the production of certain agriculture and dairy products will not qualify for BPRA.
The relief will not be available to certain businesses that are in financial difficulties.
Claiming Business Premises Relief Allowance
BPRA provides a 100% tax deduction on the capital costs a company incurs in converting, renovating or repairing a qualifying building.
BPRA will not apply to any capital expenditure in buying the land, building extensions, developing adjoining land or costs incurred on plant and machinery that does not become a fixture for land law purposes.
You can do a postcode search to get an indication of whether the property is likely to be in an assisted area, but this should not be relied upon completely.
There is a cap on the amount of expenditure that may qualify for BPRA of €20,000,000 per single investment project. A single investment project might be the renovation of a single building involving one or a number of participants; or groups of buildings in involving one or a number of participants where the outcome of the project is closely linked due, for example, its proximity. For the purposes of this limit, expenditure in sterling will be calculated into euros using the spot rate on the day on which the expenditure is incurred.
Individuals and companies which incur the capital expenditure and hold a relevant interest in the building can claim the 100% relief and deduct it from their trading profits.
For landlords the allowance will be treated as an expense of the property letting business. Those without a property business or a trade will be able to set the allowance against their other income. Property traders would not be incurring capital expenditure on conversion costs and therefore will not be able to claim.
Any BPRA claimed may be clawed back if the property is sold, demolishes or ceases to be used for qualifying purposes within 7 years after it was first used or was first available and suitable for letting.