UK: Business Premises Renovation Allowance ("BPRA"): Budget 2011

Last Updated: 6 April 2011
Article by Mark Nichols, Harpreet Bhatti and Keith Gregory

What changes has the Budget made to BPRA?

In the Budget, George Osborne announced that BPRA is being extended for a further five years from its original expiry date of 11 April 2012. Therefore we expect it now to be available in respect of any expenditure incurred before 11 April 2017.

What is BPRA?

BPRA is a capital allowances scheme for the conversion or renovation of unused buildings in disadvantaged areas. Expenditure must be incurred on or after 11 April 2007 and, as a result of the Budget, before 11 April 2017 to qualify.

The initial allowance is equal to 100% of the qualifying expenditure incurred in the first year. If the initial allowance is not claimed in full or at all in the first year, writing down allowances can be claimed at the annual rate of 25% on a straight line basis. If within 7 years of the first use of the building after conversion or renovation there is a balancing event (including the sale of the property or the grant of a long lease for a premium) then there will be a balancing adjustment. A balancing adjustment is a balancing charge or a balancing allowance in relation to capital allowances. Effectively this may result in a clawback of these allowances.

Why have BPRA?

BPRA is a scheme which is designed to act as an incentive to bring derelict or unused properties back into business use. It is to encourage economic and social regeneration in disadvantaged areas. BPRA is also used to attract high net worth individual investors by entitling them to set off any loss arising as a result of the claim for BPRA against their general income thereby achieving tax relief for the qualifying expenditure at a rate of 50% by being members of a limited liability partnership ("LLP") which incurs the qualifying expenditure. Due to the clawback of capital allowances detailed above, it is recommended there is a minimum investment time of 7 years post renovation or conversion.

When is BPRA available?

A person must incur qualifying expenditure in order to claim BPRA. Qualifying expenditure is capital expenditure on:

  • converting a qualifying building into qualifying business premises; or
  • renovating a qualifying building that is, or will be, qualifying business premises;
  • repairs to qualifying business premises

Qualifying expenditure does not include expenditure on acquiring the land, extending a qualifying building or developing land next to a qualifying building. A qualifying building is a commercial building (not last used as a dwelling) or structure situated in a disadvantaged area. Disadvantaged areas are those prescribed by legislation and include areas of Liverpool, Newcastle and Birmingham. Expenditure only qualifies for BPRA if the building is situated in a disadvantaged area and has been unused for a year immediately before the conversion or renovation begins. 

Qualifying business premises are premises used, or available for letting for use, for a trade, profession or vocation or as offices. There are exceptions to this. The following are not qualifying business premises:

  • premises used or available for use as a dwelling;
  • premises where the person holding the relevant interest in them (for example, the owner of the freehold or the leasehold) is carrying on a relevant trade;
  • premises used wholly or partly for the purposes of a relevant trade.

A relevant trade is a trade in the following sectors:

  • fisheries and aquaculture;
  • shipbuilding;
  • the coal industry;
  • the steel industry;
  • synthetic fibres;
  • the primary production of certain agricultural products, and
  • the manufacture or marketing of products which imitate or substitute milk or milk products.

Who can claim BPRA?

The person who incurred the qualifying expenditure and has the relevant interest in the qualifying building can claim BPRA. "Relevant Interest" means the interest in the building to which the person who incurred the qualifying expenditure was entitled when the expenditure was incurred.
BPRA is currently very popular, particularly in the hotel sector with LLP's being established to convert buildings into hotels and individual investors investing in the LLP.  Through the use of basic finance and often tax relief of up to 50%, the investors will typically have a nominal effective personal cost of investment in the BPRA Scheme.

Is this something you should be taking advantage of? We have experience of documentary BPRA and similar financial structures and have good contacts with financial intermediaries and developers in the sector. We are delighted to discuss opportunities with you.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 31/03/2011.

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