The expiry date for Business Premises Renovation Allowance ("BPRA") has been extended by five years to April 2017. This is good news for commercial property developers and investors. BPRA was introduced to encourage the conversion and renovation of empty business premises in specifically targeted areas. It provides 100% tax relief in respect of the capital costs incurred in bringing such premises back into commercial use and so the extension of the allowance is likely to stimulate much needed development in those areas.
There are many areas throughout the United Kingdom, including large parts of Scotland and a number of city centre areas within Glasgow, Dundee and Inverness which benefit from BPRA. You can view the areas here.
Although BPRA is available to companies, because of the higher rates of income tax it is particularly attractive to high net worth individuals. BPRA based developments often involve the formation of a syndicate by a number of investors. The investors come together to fund the conversion project and obtain tax relief in respect of the qualifying costs of conversion. As well as providing a tax incentive for those involved in the syndicate, in the current financial market a BPRA syndicate can also be an effective way to obtain funding for a development.
MacRoberts has been involved in a number of transactions which have been structured in a manner intended to ensure that tax relief under BPRA would be available in respect of the expenditure incurred on the conversion of the premises. Often the allowance makes the difference between a viable project and one that will die in the appraisal software. Our experience suggests that at the present time the scheme is most often being used by those involved in the development of hotels, as the hotel sector is one of the few at the moment where there is healthy occupier interest backed by strength of covenant.
It should be noted that there are a number of conditions which must be satisfied before the relief can be claimed and it is, therefore, important to obtain specialist advice to ensure that the conditions are satisfied.