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HMRC internal manual

Capital Allowances Manual

HM Revenue & Customs
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FCA: Qualifying building


A qualifying building is one:

  • in which all or most of the ground floor is authorised for business use,
  • where it appears that, when the building was constructed, the storeys above the ground floor were for use primarily as one or more dwellings,
  • which has no more than 4 storeys above the ground floor, and
  • whose construction was completed before 1 January 1980.

It should normally be clear which floor is the ground floor from the appearance of thebuilding. You may have a case where this is less clear, for example the building may bebuilt into a considerable slope. Normally you should treat the floor that contains themain entrance to the shop as the ground floor.

The ground floor (or part of it) is “authorised for business use” if it isapproved for use for specific business activities. These are defined in terms of the usefor which the premises are rated in ratings legislation.

Broadly, the classes of business use that qualify are retail shops, premises for theprovision of financial and professional services, premises for the sale of food and drink,other offices and premises for research and development activities and industrialprocesses which can be carried out in residential areas, and premises for medical andhealth services, such as doctor’s surgeries and dental practices. In detail, this means:

Building in England or Wales

Authorised for use within class A1, A2, A3, B1 or D1(a) as set out in the Schedule to theTown and Country Planning (Use Classes) Order 1987.

Building in Scotland

Authorised for use within classes 1, 2, 3 or 4, as set out in the Schedule to the Town andCountry Planning (Use Classes) (Scotland) Order 1997 or specified in Article 3(5)(j) ofthat Order.

Building in Northern Ireland

Authorised for use within classes 1, 2, 3, 4 or 15(a) as set out in the Schedule to theTown and Country Planning (Use Classes) (Northern Ireland) Order 1989 or specified inArticle 3(5)(b), (c) or (h) of that Order.

The upper floors must have been originally primarily for use as dwellings. Normally theoriginal use should be clear from the design and appearance of the building. However, youmay not be able to determine the original use with absolute certainty. In that case youshould treat a building as a qualifying building if it appears that the upper floors wereconstructed primarily for use as a dwelling or dwellings.

There may have been some business use in the upper floors. For example there may have beenstorerooms, offices or workshops or, indeed, the shop may have extended above the groundfloor. A building will be a qualifying building provided the greater part of the storeysabove the ground floor were for use primarily as dwellings. For example, a four-storeybuilding could qualify if it was built with a showroom or office on the first floor,provided that it appears that the original purpose of the second and third floors wasresidential.

Do not count the attic when you consider the number of storeys unless it can be lived in.An indication of this would be windows in the roof and proper stair access. An attic orloft that is not suitable for living in does not count as a storey, even if it can be usedfor storage.

The requirement that the building must have been completed by 1 January 1980 is met evenif it has been extended subsequently, as long as the extension was completed on or before31 December 2000. An extension to a qualifying building only to provide access to aqualifying flat can qualify for flat conversion allowance (FCA). FCA cannot be claimed inrespect of conversion or renovation work on an extension that was completed after 31December 2000.

You may get a FCA claim on the cost of converting a basement into a flat. The conversioncosts will qualify provided that the building is a qualifying building.

Example Rick’s café has a basement that is disused. If Rick converts itinto a flat for short-term letting the conversion costs will qualify for FCA.