Published: Mar 30, 2017
Ramsay Duff, Investment Director at Maven
After ten years Business Premises Renovation Allowance (BPRA) is being withdrawn by the Government on 5 April. Maven has been successfully structuring BPRA transactions since 2013. With an established track record of managing Venture Capital Trusts it was a natural next step for Maven to also look at tax efficient property structures following our diversification into that asset class. BPRA has perhaps been a relatively little known form of tax allowance, but when properly structured it not only provided higher rate tax paying investors with good quality underlying investments, but also a very attractive income tax saving opportunity.
Introduced in 2007, BPRA was set up to incentivise developers to renovate and redevelop existing commercial buildings which had lain empty for at least a year. Under the scheme, 100% initial capital allowances could be obtained as a deduction against income tax for the full cost of renovation in the year in which expenditure is incurred. To qualify the costs had to be incurred as a result of the conversion or renovation of a building and not towards the purchase of the asset.
BPRA will be missed, as it worked well and successfully drew investment into qualifying areas like Glasgow, Liverpool, Newcastle and Cardiff; not only bringing empty buildings back into use, but helping to stimulate economic regeneration in neglected inner cities and create local employment. Without it the likelihood is that many of these buildings would still be derelict today. There were risks involved to investing in the qualifying areas and some investors might have shied away from investing. BPRA was an effective incentive which made the risks more palatable and acted as the catalyst for bringing investment into these areas.
At Maven we specialised in utilising BPRA for the conversion of empty offices into hotels, partnering with global hotel brands such as InterContinental Hotels Group, ibis, and Travelodge. Clarence House Hotel was a prominent building in the centre of Llandudno which had lain derelict for four years. In 2013 Maven commenced the completed refurbishment of the landmark building and brought it back into use as a hotel. Similarly we have just purchased Douglas House, an empty and outdated office block in the heart of Glasgow’s city centre, and are due to start work shortly on a new 137-bedroomed hotel. It will be ideally located to target both the business and leisure markets, given its location within the International Financial Services District and being close to many of Glasgow’s major attractions such as the SSE Hydro Arena and SECC.
We now have an established portfolio of hotels across the UK which have benefited or are currently benefitting from BPRA. Investing in bricks and mortar is tangible and the positive results are clear to see. Our investors can book a room in the Hotel Indigo Glasgow, which has been operational since 2011. Similarly they will be able to stay at the impressive Grade II listed Shire Hall in Durham which is set to open in autumn 2017 following a £15 million renovation.
Despite the notable advantages of the scheme for both investors and disadvantaged areas of the UK, next week sees the final call for BPRA and HMRC will lay it to rest. However, Maven will continue to offer a range of attractive property investment opportunities through our Investor Partners co-investment network, structuring transactions for potential capital gains or through acquiring properties where value can be added through active asset management – capitalising on possible changes of use, refurbishment and redevelopment.