Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN08 Capital Allowances: Business premises renovation allowance

Who is likely to be affected?

1   Any individual or company, who incurs capital expenditure on bringing qualifying business premises (owned or let) back into business use.

General description of the measure

2   Finance Act 2005 introduced a scheme enabling people or companies, who own or lease property that has been vacant for a year or more in designated disadvantaged areas of the UK, to claim full tax relief on their capital spending on the conversion or renovation of the property, in order to bring it back into business use. The legislation in FA 2005 provided that implementation was to take place from an appointed day. A Treasury Order has today been laid and the scheme will come into effect from 11 April 2007.

Operative date

3   The legislation will have effect for qualifying expenditure incurred on and after 11 April 2007.

Current law and proposed revisions

4   Capital allowances enable the costs of capital assets to be written off against a business's taxable profits. BN02 and BN06 set out the Government's changes to the capital allowance regime.

5   Business Premises Renovation Allowance (BPRA) will provide 100 per cent initial allowance for capital expenditure on the renovation or conversion of business properties that have been vacant for a year or longer in designated disadvantaged areas of the UK. It will provide an enhanced rate of allowance for expenditure that currently qualifies for capital allowances, and new relief for renovation expenditure on commercial buildings (such as offices and shops), which does not currently qualify for any capital allowances. BN07 sets out the Government's changes to the industrial buildings allowance regime and the agricultural buildings allowance regime from 2008.

6   Since the scheme was first announced two changes have been made. Disadvantaged areas are now defined as Northern Ireland and the areas specified as development areas by the Assisted Areas Order 2007. Secondly, excluded from scheme are any premises that are refurbished by, or used by, businesses engaged in the following trades:

•   Fisheries and aquaculture

•   Shipbuilding

•   The coal industry

•   The steel industry

•   Synthetic fibres

•   The primary production of certain agricultural products; and

•   The manufacture of products which imitate or substitute for milk or milk products

Further advice

7   If you have any questions about this change, please contact Nicholas Williams on 020 7147 2541 (email: Nicholas.Williams@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk