Tax Relief on Commercial Properties
We were approached by a client who wanted to lease a number of commercial properties in Liverpool. The properties had previously been retail outlets in the City, but had been vacant for some time and had fallen into disrepair. The client's aim was to renovate the properties and turn them into offices to use in their business.
We explored the two main allowances which could be used to in order to obtain tax relief. Firstly, we considered Capital Allowances on qualifying expenditure. It was clear that the expenditure would significantly exceed the available Annual Investment Allowance of £1 million, meaning that amounts incurred over and above this level would only receive allowances at the normal rates of 6% for integral features and 18% for other qualifying expenditure.
We could also see that there would be a large amount of expenditure which did not qualify for any capital allowances, so we reviewed the client’s eligibility for BPRA (Business Property Renovation Allowance).
As the client was bringing a vacant commercial property back into economic use, and because the property was in a ‘designated area’, we were able to claim 100% tax relief for the remaining renovation expenditure. Where there was a crossover in the relief available, either from using BPRA or Capital Allowances, the claim was made in the most beneficial way, in order to minimise risk and accelerate relief as appropriate.
Timing was crucial in this case. As the client approached us before occupying the property and before undertaking any renovation work, we were able to ensure that they were advised appropriately, and they maximised tax relief.
The outcome for the client was that all of the expenditure incurred was relievable against profits, which significantly reduced their Corporation Tax bill.