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TaxationWeb's Lee Sharpe wonders if HMRC's determination to combat tax avoidance has blinded it to the purpose of some legislation.

BPRA gives up to an immediate 100% tax relief on what would normally otherwise be capital expenditure, and therefore ineligible for immediate tax relief. The relief is designed to lower the capital investment threshold to bringing disused commercial property back into business use.

On 18 July, Treasury Minister David Gauke issued a written statement to the effect that the rules for Business Premises Renovation Allowance, or BPRA, were to be simplified and clarified, in light of recent news of contrived schemes aiming to exploit the BPRA rules.

A Technical Note was also issued by HMRC – Business Premises Renovation Allowance - which was, so to speak, short on simplicity and long on clarification – in terms of what did, and what did not, qualify for BPRA. Perhaps it could be argued that one out of two is not bad.

The Note sought opinion on proposed changes to the legislation – one of which deserves special mention

At 6.13 in the Note, HMRC proposes a Targeted Anti-Avoidance Rule to deny useful relief where there are“...arrangements where the main purpose, or one of the main purposes, is obtaining a reduction in tax liability resulting from [BPRA}.”

As the Chartered Institute of Taxation observed in its written reply, “The main purpose in claiming an allowance is always to reduce a tax liability. The purpose of BPRA is to encourage certain types of investment: it does this by providing a relief which reduces tax liability.”

In other words, the proposed TAAR would effectively serve to deny relief on any BPRA claim. Which is, presumably, not what parliament intended when it drew up the original legislation, sought EC permission to extend BPRA eligibility for another 5 years, and expressly removed it from the scope of the legislation which introduced a cap on “unrestricted tax reliefs”. 

Or perhaps HMRC has the right of it, and BPRA is set to become a victim of its own success, much in the way that tax-free income on domestic solar-pv arrays was a year or so ago.