Business premises renovation allowance (BPRA)
Business premises renovation allowance (BPRA) was introduced as an incentive to encourage businesses to bring derelict or unused business properties in disadvantaged areas back into use. The allowance takes the form of a 100% capital allowance for certain expenditure incurred in the renovation or conversion of a qualifying property into qualifying business premises.
BPRA has been available since 11 April 2007. It is due to come to an end on 31 March 2017 for corporation tax purposes and on 5 April 2017 for income tax purposes.
BPRA is only available in respect of expenditure on qualifying building. These are commercial buildings or structures in an area designated as a disadvantaged area (but which have not been previously used or are available as a dwelling).
Qualifying business premises
A qualifying building becomes qualifying business premises when it is used or available and suitable for use for letting for the purposes of a trade, profession to vocation, or as an office or offices. The building cannot be used, or available for use, as or as part of a dwelling.
The allowance is given in respect of `qualifying expenditure’. This is capital expenditure incurred in:
- converting a qualifying building into qualifying business premises;
- renovating a qualifying building that is or will become qualifying business premises; or
- repairing a qualifying building.
More specifically, the type of expenditure that may qualify for the allowance includes expenditure on:
- building works (labour and material costs);
- architectural and design services;
- surveying costs;
- engineering services;
- planning applications; and
- any statutory fees or permissions.
Plant and machinery expenditure only qualifies to the extent that it is incurred on the following:
- integral features;
- automatic control systems (for opening and closing doors, windows or vents);
- window cleaning installations;
- fitted cupboards;
- protective installations (e.g. fire alarms, fire escapes, sprinklers, etc.);
- computer-based building management systems to control mechanical and electrical equipment such as lighting, ventilation, power systems, fire systems and security systems;
- cabling for telephone, audio-visual data installations and computer networking facilities;
- sanitary appliances and bathrooms comprising hand driers, counters, partitions, mirrors and shower facilities;
- kitchen and catering facilities;
- public address systems; and
- intruder alarm systems.
Amount of relief
Qualifying expenditure is eligible for an initial allowance of 100%, providing immediate write-off against profits. It is not mandatory to claim the 100% allowance and to the extent that the allowance is not claimed or is not claimed in full, the expenditure is eligible for a writing down allowance, which is given on a straight line basis at 25%.
A balancing adjustment is made if a balancing event (e.g. the sale of the relevant interest) occurs within five years of the date of first use of the building after renovation or conversion. If the expenditure was incurred before 1/6 April 2014, the trigger period is seven years.
Need to know
There is a limited period for claiming this relief as it is due to come to an end in 2017.
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