Upper Tribunal - London Luton Hotel BPRA Property Fund LLP v HMRC

The UT disagreed substantially with the FTT in this recent BPRA case – taxpayers should reassess their claims in light of the UT’s findings.

The UT disagreed substantially with the FTT in this recent BPRA case – taxpayers.......

The First-tier Tribunal (FTT) had previously ruled on the applicability of the Business Premises Renovation Allowance (BPRA) legislation to expenditure incurred by London Luton BPRA Property Fund LLP as part of an arrangement to convert a disused flight training centre into a hotel by paying a fixed sum to a developer (OVL) to provide a completed building. In doing so, the FTT allowed a claim in respect of various costs which previously might have been considered to be outside the scope of BPRA relief. Various cross-appeals from HMRC and the taxpayer followed, and the Upper Tribunal (UT) has come to different conclusions to the FTT on many of the items appealed. However, the overall outcome is not unfavourable to the taxpayer and should prompt a review of previously submitted claims for BPRA to ensure the allowances claimed are correct in the light of this decision.

The first issue was whether it was appropriate to look beyond the payment by the LLP to the developer in determining what is qualifying expenditure for BPRA, or whether the simple fact that money was exchanged for a completed development was sufficient. The UT disagreed with the way the FTT had approached this question (focusing on the way OVL had spent the money), determining what was relevant was what rights or obligations were obtained by the LLP in return for their payment, in other words, what did the LLP get for its money.

Harinder Soor

Partner – Claims and Incentives

KPMG in the UK


The second issue concerned the specific payments made by OVL in the course of the development, and as with the FTT’s judgment, this largely hinged on the meaning of CAA2001 s.360B defining qualifying expenditure as “expenditure incurred…on, or in connection with” the conversion of a qualifying building (a wider meaning to other areas of CAA2001). The UT also clarified that the references to the qualifying business premises could include expenditure on readying the property for a specific business use, rather than being limited to the physical construction works alone.

In light of this nuance, and the different question that was asked as part of the first issue, the UT disagreed with the FTT on a number of items.

Specifically the UT found that the Capital Account (an amount deposited as security for a bank loan), a payment to a hotel consultant with whom OVL fell out and the residual profit OVL made as part of the development should all qualify for BPRA, whereas the FTT had found that they should be excluded, wholly or partly. This was because, when looked at in the round, the payments all went towards providing the LLP with a completed development, even if some of the payments were perhaps unconventional.

Conversely they found that the Interest Amount, a payment made to OVL and subsequently returned to the LLP by way of payments for a licence to occupy the building during the works, was ineligible as it was a circular payment designed wholly to convert a revenue cost to a capital one in order to create BPRA entitlement and was therefore not expenditure in connection with the conversion. The UT confirmed that legal fees relating to the property acquisition were not eligible for BPRA, something which the FTT had implied but not clearly determined. The FTT’s determination that promoter and IFA fees, and incidental infrastructure works to the surrounding area were eligible as part of a BPRA claim was upheld.

This case again demonstrates how broadly the BPRA legislation can be applied, and taxpayers who have previously submitted BPRA claims should reassess them in light of the UT’s findings.