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HMRC internal manual

Capital Allowances Manual

Business Premises Renovation Allowance: Qualifying expenditure, qualifying building and qualifying business premises

CAA01/S360B - S360D

Meaning of qualifying expenditure

Qualifying expenditure is capital expenditure on

  • converting a qualifying building into qualifying business premises,
  • the renovation of a qualifying building that is, or is to be, qualifying business premises, and
  • repairs to a qualifying building.

This is not qualifying expenditure. Expenditure on

  • acquiring land,
  • extending a qualifying building, or
  • developing land next to a qualifying building.

For example, adding another storey to a qualifying building or creating a basement fora qualifying building is not qualifying expenditure.

Example Jasper buys a warehouse situated in a disadvantaged area that hasbeen unused for 3 years and converts it into a hotel. Jasper’s expenditure onconverting the warehouse into a hotel, but not on buying the warehouse and the land thatit stands on, is qualifying expenditure. If Jasper creates a basement for the hotelbecause he needs more storage space the expenditure on creating the basement is notqualifying expenditure.

Meaning of qualifying building

A qualifying building is an unused commercial building or structure orpart of an unused commercial building or structure. The building must have been unused fora year immediately before the conversion or renovation began. This means that it must nothave been used for anything for a year before conversion begins. The last use must nothave been as a dwelling.

Example As in the previous example Jasper buys a warehouse situated in adisadvantaged area that has been unused for 3 years and converts it into a hotel. Thewarehouse is a qualifying building and so Jasper’s conversion expenditure isqualifying expenditure and qualifies for BPRA.

If a qualifying building is situated partly in a disadvantaged area and partly outside itmake a just and reasonable apportionment of the qualifying expenditure to find the partattributable to the part in the disadvantaged are. Only that part of the expenditurequalifies for BPRA. For example, if a qualifying building is situated on the boundary of adisadvantaged area so that one third is in the area and two thirds is outside it only onethird of the qualifying expenditure qualifies for BPRA.

Meaning of qualifying business premises

A building or part of a building is qualifying business premises if it isa qualifying building that is used, or available and suitable for letting for use, as acommercial building other than a dwelling. A commercial building is abuilding in use for the purposes of a trade, profession or vocation or as offices.

There are some exceptions to this. These are not qualifying businesspremises. Premises

  • used or available for use as a dwelling,
  • where the person holding the relevant interest in them is carrying on a relevant trade, or
  • 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 for milk and milk products.

Example As in the previous examples Jasper buys a warehouse situated in adisadvantaged area that has been unused for 3 years and converts it into a hotel. Thehotel is qualifying business premises and so Jasper’s conversion expenditurequalifies for BPRA. If Jasper had converted the warehouse to a house that he intended tolive in or let, the house would not be qualifying business premises and there would be noBPRA due.

Part of a building

The capital allowances legislation applies to part of a building in the same way as itapplies to a whole building. So if part of a building has been unused for more than a yearand is converted to qualifying business premises the conversion expenditure qualifies forBPRA.

Example Jim owns and runs the Morrison hotel. He decides to move to Parisand lets the hotel become disused. He lets all the floors above the ground floor toLeonard, who wants to run it as a hostel. After the ground floor has been unused for 2years Alice says that she is looking for restaurant premises. Jim leases the ground floorto Alice who converts it into a restaurant. Alice’s conversion expenditure qualifiesfor BPRA.

Temporary disuse

Premises that are qualifying business premises may become temporarily unsuitable for useas a commercial building.

For example, there may have been a leak causing water damage.

If premises are qualifying business premises immediately before they are temporarilyunsuitable for use as a commercial building they are treated as qualifying businesspremises during the period of temporary disuse. This means that temporary disuse is not abalancing event CA45800.

Example As in the previous examples Jasper buys a warehouse situated in adisadvantaged area that has been unused for 3 years and converts it into a hotel. Thehotel is qualifying business premises. The tank in the loft bursts causing a lot of waterdamage which means that the hotel is unsuitable for use. Jasper closes the hotel whilerepairs are done. This is temporary disuse and so there is not a balancing event.