CA45400 - Business Premises Renovation Allowance: The relevant interest

CAA01/ S360E and S360F

The basic rule is that the relevant interest in a qualifying building in relation to qualifying expenditure is the interest in the building to which the person who incurred the qualifying expenditure was entitled when the expenditure was incurred.

If the person who incurs the qualifying expenditure has more than one interest in the building the relevant interest is the interest that is reversionary on the others.

Example

Ollie owns the freehold of a qualifying building. He leases the building to Maureen on a 49 year lease and then leases it back on a 10 year lease. If Ollie incurs qualifying expenditure on the building after the lease and leaseback the relevant interest inrelation to that qualifying expenditure is the freehold interest because his freehold interest is reversionary on his leasehold interest.

If the person who holds the reversionary interest creates a lease or other interest subordinate to the relevant interest, the relevant interest is not affected.

Example

As in the example above Ollie owns the freehold of a qualifying building. He incurs qualifying expenditure and then leases the building to Maureen on a 49 year lease. The relevant interest in relation to the qualifying expenditure is still the freehold interestafter the creation of the lease.

If the relevant interest is a leasehold interest which is extinguished because the person holding it acquires the interest that is reversionary on it, the interest into which the leasehold interest merges becomes the relevant interest.

Example

Tracey has a leasehold interest in a qualifying building and that leasehold interest is the relevant interest in relation to the qualifying expenditure on converting it into qualifying business premises. She decides to buy the freehold of the building. Once she has bought the freehold the freehold becomes the relevant interest.

If the person who incurs the expenditure on converting a qualifying building into qualifying business premises is entitled to an interest in the building on or as a result of the conversion the person is treated as having had that interest when the expenditure was incurred. For example, if a person has an agreement for a lease when they incur the qualifying expenditure and the lease is granted once the expenditure has been incurred the lease is the relevant interest.

Example

Dylan incurs expenditure on converting a qualifying building into a wine bar. While he incurs the expenditure he has an agreement for a 999 year lease of the wine bar once conversion is complete. Dylan does the conversion work and is granted the 999 year lease.The 999 year lease is the relevant interest in relation to Dylan’s conversion expenditure.