CA45100 - Business Premises Renovation Allowance (BPRA): Background and outline

Background

Business Premises Renovation Allowance ( BPRA) was introduced by Finance Act 2005 with a start date to be announced. BPRA is intended to give an incentive to bring derelict or unused properties back into use. BPRA gives an initial allowance of 100% for expenditure on converting or renovating unused business premises in a disadvantaged area. The start date is 11 April 2007 so expenditure must be incurred on or after 11 April 2007 to qualify for BPRA.

The scheme has a life of 5 years so expenditure must be incurred before 11 April 2012 to qualify.

Disadvantaged areas

These are the areas that are disadvantaged areas for BPRA.

• Areas specified as development areas by the Assisted Areas Order 2007(SI 2007/107)
• Northern Ireland.

If you need to check whether an area is a disadvantaged area for BPRA you can find the Assisted Areas Order 2007, No 107 at http://www.opsi.gov.uk/si/si2007/uksi_20070107_en.pdf , If you know the post code you can use the post code database which is at http://www.dtistats.net/regional-aa/aa2007.asp

Conditions

A person must incur qualifying expenditure in order to claim BPRA.

Qualifying expenditureCA45300 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, or
• repairs to qualifying business premises.

Expenditure only qualifies for BPRA if the building is situated in a disadvantaged area and has been unused for a year immediately before the conversion or renovation begins. The last use must not have been as a dwelling.

A qualifying building is a commercial building or structure situated in a disadvantaged area.

Qualifying business premisesCA45300 are premises used, or available for letting for use, for a trade, profession or vocation or as offices. There are some exceptions to this. These are not qualifying business premises. Premises

• used or available for use as a dwelling
• the relevant interest in which is held by a person carrying on a relevant trade or
• used wholly or partly for the purposes of a relevant trade.

A relevant trade is a trade in the following sectors –

Aquaculture is activities such as fish farming.

Expenditure on acquiring land, extending a building or developing land next to a building does not qualify for BPRA.

Allowances and charges

There is an initial allowanceCA45500 equal to 100% of the qualifying expenditure.

If the 100% initial allowance is not claimed, or is not claimed in full, the person that incurred the qualifying expenditure and holds the relevant interest in the qualifying building in relation to the qualifying expenditure may claim writing down allowances (WDAs) CA45600. WDAs are given at an annual rate of 25% on the straight line basis to the person holding the relevant interest until all the qualifying expenditure has been allowed.

The relevant interestCA45400 in the building in relation to the qualifying expenditure is the interest to which the person incurring the qualifying expenditure was entitled when the qualifying expenditure was incurred.

There is a balancing adjustment if there is a balancing event within 7 years of the first use of the building after conversion or renovation. A balancing adjustmentCA45800 is a balancing charge or a balancing allowance. The main balancing events are the sale of the relevant interest and the grant of a long lease for a premium out of the relevant interest.

How allowances are given and charges made

If the person entitled to BPRA has a trade, profession or vocation the allowance is treated as an expense and a balancing charge is treated as income of that trade, profession or vocation.

If the person entitled to BPRA has a property business, that is if the person is the landlord of the building, the allowance is treated as an expense and a balancing charge is treated as income of that property business.

Where the person entitled to BPRA does not have a trade, profession or vocation or a property business the person is treated as if he, she or it were carrying on a property business (a virtual property business) and the allowance is an expense of that virtual property business. This means that the allowance can be set against the person’s other income. Again, a balancing charge is treated as income of that virtual property business.