Clock is ticking for tax relief on derelict property renovations
QUESTION: I'm considering purchasing a derelict commercial property, which requires major renovation works to bring it back in to functional use. Will I get tax relief on the renovation costs?
ANSWER: Business premises renovation allowance (BPRA) was introduced in April 2007 to provide an incentive for businesses to tackle derelict shops and empty business premises and to bring them back into productive use.
Under the scheme, 100 per cent initial capital allowances are available for qualifying renovation expenditure, meaning businesses can obtain a deduction against profits for the full costs of renovation in the year in which that expenditure is incurred. The relief is available to sole-traders, partnerships and limited companies.
There are a number of conditions which must be met in order for the expenditure to be qualifying for relief. The person incurring the expenditure must have a relevant interest in the property. The property must be a business premises; must be unused for more than 12 months and must be in a “disadvantaged area” (for the purposes of BPRA relief Northern Ireland is deemed such an area).
Businesses looking to renovate unused commercial buildings should consider any opportunities that are available in disadvantaged areas in order to accelerate relief for renovation costs by claiming BPRA. It is important to note that each case must be considered individually to establish exactly what expenditure is qualifying for the relief.
Only expenditure which is incurred on or in relation to the conversion or renovation of a qualifying building into a qualifying business premises can be claimed.
In order to qualify a building must be:
• Empty for at least 12 months before work begins
• In a designated disadvantaged area
• Must have been last used as a commercial property and not a dwelling
• Must remain as business premises following conversion/renovation
Examples of expenditure that qualifies for the relief are:
• Building work
• Architectural and design services
• Surveying or engineering services
• Planning applications
• Statutory fees and permissions.
The costs of acquiring land, extending a building or developing land beside a building do not qualify for BPRA.
If a property is sold, demolished or ceased to be used for qualifying purposes within seven years (five years for expenditure incurred from April 1 or 6 2014) after it was first used following conversion or renovation there will be a clawback of relief.
The BPRA scheme closes on March 31 this year for companies and fromApril 5 for unincorporated businesses, so those wishing to take advantage of the scheme who have yet to do so should be aware that time is running out. If the expenditure is incurred after those dates, no BPRA relief will be available to claim.
:: Malachy McLernon (firstname.lastname@example.org) is a director of PKF-FPM (www.pkffpm. com). The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.