Finding the right premises for a small or micro entity can be tough. Commercial rents can be prohibitively expensive, and even if the perfect location is located, it might need considerable work to get it up to a good standard.
When operating on a slim budget, the amount of money available for renovations and other building work can be very tight. This is where the Government hopes the Business Premises Renovation Allowance (BPRA) comes in.
Need a bigger business space? Your business could benefit from the BPRA
First unveiled back in April 2007, the tax relief measure came into being to help and encourage businesses and investors in certain areas into long-vacant commercial properties. The BPRA provides tax relief on 100 percent on capital expenditure made in returning a disused commercial property to business use.
A 2012 report by business data and insight site the Local Data Company revealed some stark realities. They found that 14.6 percent of all commercial properties in the UK were vacant in 2012, the highest number since they started reportage four years earlier.
The Business Premises Renovation Allowance was supposed to end in April of 2012, but, due to persisting problem of empty shop fronts, stores, and premises, the government extended this until April 2017.
For smaller businesses looking for a home, this is a great incentive to get into disused premises.
How the Business Premises Renovation Allowance Works
The government has defined areas that are what it terms ‘assisted areas’. The government has identified these areas as having particularly low commercial occupancy rates. The areas that come under this definition are available on the government’s legislation website and there’s also a postcode finder to find out if a certain area is covered.
As such, it pays small and micro businesses to know a little about the relief, as it could be very helpful. Some places in assisted areas are quite unexpected, with Liverpool and Birmingham’s city centres falling under the scheme.
The amount allowable per premises is €20 million. With such a high ceiling, it is probable (unless building the fanciest officer ever) that small businesses will find ample relief available. The relief has a number of conditions, a few of which are:
∙ The enterprise must not be in financial difficulty.
∙ The property can be for business purposes only, with no dwellings allowed.
∙ The property must have been empty for one year.
∙ Ownership is retained of the property for at least seven years after being renovated.
∙ The property must be available for occupation.
There are certain industries that are excluded from the scheme, which was necessary in order for the BPRA to be passed by the EU. A full list of those industries is available here.
How to Benefit
Small businesses, whether looking to set up for the first time or planning on relocation, would do well to research their area for its BPRA coverage. If it is not within a specified assisted area, researching the surrounding areas is a good idea. Crunch the numbers and work out if it would be cheaper to relocate the business to an area where the BPRA is in effect in the long-term.
There are many other ways to take advantage of the BPRA to provide a good return on investment. Many accountants and investment firms offer advice and plans on BPRA schemes as rote.
The BPRA is meant to be accessible to all forms of business, from individuals, through to larger concerns. As such, there are various ways by which the money spent on renovating disused properties can become an investment. In order to purchase a property, the business owner will either obtain funding from a bank or from investors, often times a mixture of both. This created syndicate will then receive tax relief on 100 percent of its expenditure on renovating the property. BPRA projects can be intriguing investment vehicles for many, as the higher the investor’s tax rate is, the more relief they will receive. For example:
If an investor were in the highest tax rate bracket – 50 percent, then a one hundred thousand pound investment would receive a tax refund of fifty thousand pounds.
In certain cases, this could provide a mutually beneficial relationship between a small business owner-manager and investors. There is a stipulation in the BPRA regulations that says money invested in a property must remain so for seven years, or the refunds received can be clawed back. This provides investors with a long-term investment vehicle, the business owner with premises that can be used or rented, should they and syndicate decide, and, after seven years, the property can be sold, providing a healthy return on investments. Alongside all of this, the investment and capital generated by the business is good for the local and wider economy.
For those just seeking an investment, there are ways to maximise the benefits of the BPRA. Once a property has been secured and renovated, one way to get a return on investments is to rent the property out. The money accrued from rent can meet repayments for bank loans, overheads, and the usual accumulation of fees. After the renting of the property, the syndicate could then sell it and, depending on the property market, recoup the original investment and some more besides.
The BPRA is great for businesses seeking new premises, and for investors looking for something long-term to put their money into. The scheme hopes to sweep away the empty and dilapidated shops fronts and premises that have come to blight many high streets and industrial estates. Investment in an assisted area can be good for all involved, with local economies and businesses benefitting, whilst backers make a profit in a long-term, bricks and mortar investment.
As well as moving on up and into bigger and better premises as your business grows, you might want to think about upgrading your accounts system. Here at KashFlow, we’re so confident in the quality of our products that we offer a free 14 day trial of our innovative accounting software that you can try out.