If you have vacant space and planning on incurring expenditure, Business Premises Renovation Allowances (BPRA) offer investors a significant increase in returns by providing 100% tax relief in the year of expenditure on bringing the space back into use, but the expenditure must be committed before its expiry in April 2017.
When Alistair Darling announced the introduction of a new 100% tax relief for vacant buildings from April 2007 there was little take up. George Osborne announced its extension in 2012 for a further 5 years and with investor confidence returning, the number of BPRA qualifying claims has steadily increased. In recent years, there has been some negative press around the use of certain targeted BPRA schemes, detracting from what is good about this tax relief, which is in essence to offer investors a sizeable tax incentive to encourage investment in vacant or part vacant property.
When does it Apply
To attract the tax relief there are a number of criteria that have to be met in order to qualify, including:
- Own a commercial property
- Has been empty (building or floor) for a minimum of 12 months
- Located in an assisted area
- Incur capital expenditure
- As a result the building is brought back into commercial use
- Hold property for 5 years post expenditure
BPRA provides a 100% tax relief on the subsequent capital expenditure incurred on bringing the empty building or floor back into use. This attractive tax efficient wrapper has led to a large number of “change in use” conversions, particularly in the hotel sector, but can be applied to most commercial uses, but excludes residential dwellings.
An example of the benefit is demonstrated in a live case study of a £2.5m office refurbishment. Without the BPRA relief £1,6m qualified for Capital Allowances, providing a cash saving of £320,000 over a number of years. However, claiming BPRA across the full expenditure gave £500,000 of cash savings realised in the year of expenditure, providing a significant cash flow boost.
If you own an empty floor or building in a qualifying location www.ukassistedareasmap.com factoring in the ability to attract 100% tax relief can greatly assist the feasibility of a scheme. Noting that there is a minimum holding period of 5 years BPRA can significantly increase the return on your investment, but you will need to act soon before it is withdrawn for good.
If you are a client or have acted for a client who has purchased property, then please call one of our Directors who will provide a no fee review to assess the Capital Allowances position.