CA45910 - Business Premises Renovation Allowance: Writing off of qualifying expenditure

CAA01/ Ss360Q, 360R and 360S

An initial allowance is written off at the time that the qualifying business premises are first used or available for letting. This means that an initial allowance may be written off some time after it is made because an initial allowance is made for the chargeable period in which the expenditure is incurred. If the relevant interest is sold before the building is first used the initial allowance is withdrawn.

Example

Tracey incurs expenditure of £100,000 qualifying for BPRA in her period of account ended 24 May 2007 and claims initial allowance. The premises are not available for letting until 1 March 2008. The initial allowance is made for Tracey’s accounting period ended 24 May 2007 because that is the period in which the expenditure was incurred but it is not written off until 1 March 2008.

A WDA is written off at the end of the chargeable period for which it is made.

If there is a balancing event at the end of the chargeable period a WDA made for that chargeable period is taken into account in calculating the balancing adjustment.

If a qualifying building is demolished and the demolition costs are incurred by the person who incurred the qualifying expenditure the net cost of demolition is added to the residue of qualifying expenditure immediately before demolition.

Example

As in the example above Tracey incurs expenditure of £100,000 qualifying for BPRA and claims initial allowance. The building is demolished and Tracey incurs demolition costs of £8,000. She does not receive anything for the remains. The residue of expenditure when the building is demolished is nil because initial allowance of 100% was claimed. It becomes £8,000 when the demolition costs are added to it. If Tracey receives nothing for the demolished building she can claim a balancing allowance of £8,000.

The net cost of demolition is the cost of demolition less any money received for the remains of the building.

If the net cost of demolition is added to the residue of qualifying expenditure immediately before demolition, the demolition costs cannot be treated as expenditure incurred on a property that replaces the demolished property.