Incentives for investment

By Tolley in association with Martin Wilson, the Capital Allowances Partnership Limited

The following Corporation Tax guidance note by Tolley in association with Martin Wilson, the Capital Allowances Partnership Limited provides comprehensive and up to date tax information covering:

  • Incentives for investment
  • Flat conversion allowances
  • Business Premises Renovation Allowances
  • Research and development allowances

Flat conversion allowances

Flat conversion allowances (FCAs) were withdrawn from 1 April 2013.

FA 2012, Sch 39, Part 5, paras 36–42

However, provisions relating to ‘sale prior to use’ and balancing adjustments continue to apply beyond April 2013. This means that details of flats which have taken advantage of this relief will need to be retained for seven years after the flat was able to be let.

CAA 2001, ss 393I, 393M–393P

For expenditure incurred between May 2001 and April 2013, a 100% initial allowance was available where the owner of a qualifying building (typically a shop) incurred capital expenditure on converting or renovating an empty space above the shop into a qualifying flat.

CAA 2001, s 393A

The allowance was 100% of the conversion or renovation costs. There were no FCAs on the actual purchase price of the property.

As with ordinary capital allowances, a partial claim for the initial allowance could be made. Thereafter, writing down allowances (WDAs) were given at 25% on a straight-line basis.

CAA 2001, s 393K

Balancing adjustments will arise if the property is sold within seven years or is not let or held out for letting during that time.

CAA 2001, s 393N

The property must have business premises on the ground floor (defined by specific business rates) and an empty space on the first or subsequent floors. The flat must be made available for short-term letting after conversion.

The FCAs can be set against the rents received from the letting. The allowance is available when the property is first available for letting, not when the company starts incurring the expenditure.

The space converted into the flat must either have been unused or used only for storage throughout the 12 months prior to the work commencing. Consequently, if a company bought business premises with

More on Capital allowances: