London Luton BPRA Fund LLP v HMRC

The Upper Tribunal has ruled on the availability of business premises renovation allowances (“BPRA”) in London Luton BPRA Property Fund LLP v HMRC [2021] UKUT 147 (TCC). 

The taxpayer had claimed c£12.5m of BPRA on expenditure incurred under an agreement with a developer which provided for the conversion of a former flight training centre near London Luton Airport into a hotel.  Large elements of the claim were disallowed by HMRC.  The case turned on whether the expenditure was incurred “on, or in connection with” the “conversion” of the flight training centre into “qualifying business premises” (section 360B Capital Allowances Act 2001).

The Upper Tribunal held that the relevant statutory question was: “on or in connection with what was the [taxpayer’s] expenditure incurred?” and not (as the FTT had held) “on or in connection with what was the developer’s expenditure incurred?”  In answering that question, it was necessary to take into account all matters and circumstances. 

The Upper Tribunal concluded that the LLP had obtained not simply the developer’s obligation to carry out the construction works, but also a series of specific obligations on the part of the developer.  It therefore analysed each of those obligations to determine the extent to which the taxpayer’s expenditure qualified for BPRA. 

The Upper Tribunal held that most of the disputed items of expenditure qualified for BPRA.  The qualifying items included: money deposited in a capital account as security for a loan; IFA fees; promoter fees; franchise costs; fixtures, fittings and equipment and a residual amount (representing the surplus which accrued to the developer on the transaction).  A licence fee and certain legal fees were held to represent non-qualifying expenditure. 

Malcolm Gammie QC and Jonathan Bremner QC appeared for the taxpayer, instructed by DWF LLP.

A copy of the Decision is available here.