Business Premises Renovation Allowance (BPRA) provides a 100 percent tax relief on any capital expenditure incurred on the conversion or refurbishment of empty business premises
BPRA applies to individuals, corporates and trustees. The ability to gear up the investment and enhance the capital allowances means that it is being seen as an increasingly attractive investment, as well as a means of sheltering income.
Fundamentals of BPRA
A number of basic requirements have to be met for BPRA to be available. These relate to:
- the nature of the building
- qualifying costs
- the location of the building
For the building to qualify it:
- must be in a designated disadvantaged area
- must have been empty for at least a year before renovation works begin
- must have been last used for the purposes of a trade, profession or vocation or as an office
- must not have been used as a dwelling
- must remain as business premises after the renovations have taken place
Certain trades disqualified by the EU State Aid rules do not qualify for BPRA, such as fisheries and coal and steel industries.
BPRA can be claimed on capital costs arising from:
- converting a qualifying building into qualifying business premises
- renovating a qualifying building that is, or will be, qualifying business premises
- capital repairs to qualifying business premises
It cannot be claimed on the costs of acquiring the land on which the building sits.
The building must be located in a designated disadvantaged area. Designated disadvantaged areas are detailed on the following web page:
Individuals and trustees can elect to set off 100 percent of the allowances against their income in the tax year in which expenditure is incurred. Any excess can be carried forward and set off against total income in the following tax year.
For a company the rules are similar in that it can offset any losses in the property business against its other income and to the extent the losses are not relieved they can be carried forward and offset against future rental income.
Any BPRA claimed may be clawed back if the property is sold, demolished, or ceases to be used for qualifying purposes within seven years after it was first used or first available and suitable for letting.
Capital gains tax is payable if the sales proceeds exceed the cost of acquiring the building and the refurbishment costs. If the building is sold for less than the purchase price, there may be a restriction on a capital loss that can be claimed because of the income tax relief that has already been claimed on the renovation costs.
Whilst a BPRA investment can be an interesting alternative to more traditional forms of tax favoured investments, such as the Enterprise Investment Scheme and Venture Capital Trusts, it is worth noting that the actual amount of allowances which an investor will receive cannot be determined with certainty until the claim is finalised with the Revenue.