The First-tier Tribunal (FTT) has found that work undertaken by a company to convert a warehouse into a car showroom qualified for Business Premises Renovation Allowance (BPRA), a 100 per cent tax allowance available between 2007 and 2017 on qualifying expenditure on converting or renovating unused business premises in disadvantaged area.

The company had purchased the disused warehouse towards the end of 2015 and, the following year, converted it into a car showroom and workshop. It claimed BPRA in respect of nearly £1.4 million of the costs of the works. After HM Revenue and Customs (HMRC) denied the BPRA deduction, the company appealed to the FTT.

The FTT had to decide on the statutory meanings of the words ‘conversion’ and ‘renovation’ and whether the works fell within those definitions. The company contended that a conversion involved a change of form, which included structural alterations and adaptations. It argued that the works carried out were precisely within policy objective of BPRA of encouraging the conversion of disused buildings and making them available for business use. It also pointed out that no new foundations had been laid or new ground broken, and no new floors had been added.

HMRC argued that the works went far beyond conversion or renovation. The building’s footprint had been reduced and its external and internal appearance significantly altered. All that remained of the original warehouse was a section of the skeleton and the reduced slab beneath it. The warehouse had not survived the works and the car showroom was effectively a new building.

The FTT accepted that, as a matter of straightforward language, conversion required a continuity of identity between the old and new buildings. In finding that there was sufficient continuity of identity, the FTT considered that, although the warehouse had been substantially transformed, it had continued to exist. While BPRA was not available in respect of extensions to buildings, there was nothing in the legislation that prevented BPRA being claimed where a building’s area or volume had been reduced.

The FTT also found that, in the context of the purpose of the legislation, conversion could include alterations that reflected a change of use of the building. The FTT did not believe Parliament had intended to restrict the definition of conversion to restoring the building’s previous use, noting that this would in fact be a renovation rather than a conversion.

The FTT therefore concluded that the works comprised a conversion and therefore attracted BPRA. The appeal was allowed.