Political Challenge of BPRA-style Incentives

A UK election is looming. While the outcome could well have repercussions on Scotland’s future constitutional direction, the Westminster Government has a decreasing amount of direct influence over day to day policy matters north of the Border.

Tax reliefs like the recently ended Business Premises Renovation Allowances (BPRAs) scheme, designed to enhance development and regeneration, are however an example of measures which remain in the power of the UK Government and directly impact on Scotland.

Introduced in 2007 to help encourage the conversion or renovation of commercial buildings in disadvantaged areas, BPRAs served as an effective measure in helping regenerate sites in some of Scotland’s most deprived communities. The initiative stimulated private investment, offering businesses  100 per cent tax relief on qualifying costs of renovation or conversion of unused or derelict former commercial business premises and, in some cases, covered structural work, which otherwise would not qualify for allowances.

BPRAs certainly had a positive impact on our commercial property and construction sector and they benefitted communities, including many parts of Glasgow. The Park Inn Hotel in the city’s West George Street, developed through the conversion of an older building and a project which might not have otherwise been financially viable without BPRAs, is a prime example of this.

Glasgow-based Maven Capital Partners, a leading provider of BPRA-based hotel development funding, has been engaged in a number of projects across the UK including the Glasgow hotel development Telfer House in Merchant’s City where old buildings have been brought back into use, creating employment and tax income for the Treasury. Many of these developments wouldn’t have proceeded in recent times without BPRAs. Challenging regeneration projects in other parts of Scotland, including the Dundee Waterfront, have also benefitted immensely from the initiative which came to an end last month.

While the view amongst many developers is that BPRAs have served their purpose, there is also a strong argument for an alternative to be put in place. Deprived areas across the UK, including many within Scotland which are so badly in need of economic generation, are crying out for a new investment incentive initiative which can drive forward commercial development opportunities and encourage more residential building through the conversion of empty properties for domestic use.

While there are tax avoidance concerns around incentive schemes like BPRAs, politicians need to find effective means of tightening up rules to prevent this from happening. These concerns, while legitimate, should not be the justification for not maintaining a policy which has delivered so many positive outcomes.

Given the impact which BPRAs have had in transforming both UK and Scottish communities, especially deprived ones, political parties need to be challenged on this issue in the run up to the 8 June vote. What are their plans, if any, to reinstate measures which will continue to regenerate communities, drive developments, improve housing accessibility? Not only is there a strong social case but also a sound economic one. It’s certainly a major issue which makes the forthcoming election even more relevant here in Scotland.

John Rodger, Partner and commercial property specialist at accountants Chiene + Tait