CA43300 - FCA: Relevant interest

CAA01/S393F - S393G

A person must have a relevant interest in the flat at the time they incur the conversion or renovation expenditure to be entitled to flat conversion allowance (FCA). This will normally be a freehold or leasehold interest in the property, or the part of the property that is being converted or renovated. A person who does not have the relevant interest at the time they incur the conversion or renovation expenditure may claim FCA provided they are entitled to an interest in the flat as a result of the conversion.

The rules for determining the relevant interest are similar to those for industrial buildings allowances.

The relevant interest in a flat in relation to any qualifying expenditure is the interest in the flat to which the person who has incurred the expenditure is entitled when the expenditure is incurred. Thus, if the person who incurs the expenditure owns the freehold in the building when the expenditure is incurred, the freehold is the relevant interest. Similarly, if he or she holds a long lease, that lease is the relevant interest.

Example As in the example at CA43100 Rick runs a café-bar. It is in the ground floor of a 3 storey building Rick has a 75 year lease of the building. He uses the first floor for storage. He does not use the second floor. Victor holds the freehold. If Rick converts the second and third floors to qualifying flats the relevant interest in the flats is Rick's leasehold interest. If Victor does the conversion the relevant interest in the flats is his freehold interest.

If that person has more than one qualifying interest and one of these is reversionary on all the others, the reversionary interest is the relevant interest. Similarly, the creation of a lease or other interest does not lead to the original interest ceasing to be the relevant interest.

Where the relevant interest is leasehold and it is extinguished by the person acquiring another interest, which is reversionary on it, the interest into which the leasehold merges becomes the relevant interest.

A person who incurs expenditure on converting part of a building into a flat and is entitled to an interest in the flat on or as a result of the completion of the conversion is treated as having had that interest at the time the expenditure was incurred.