Read our recent article for ‘Your Move’ magazine – and make the most of valuable property tax breaks

Q: I have just purchased at auction a small parade of shops and was considering converting the currently empty space above the shops into 4 residential flats to let out. Is this a good idea from a tax point of view?

 A: There is a scheme called the ‘Flat Conversion Allowance’ which gives investors income tax relief on the cost of converting vacant property above shops and offices into residential flats.  This scheme will however be withdrawn in April 2013 so you will need to act quickly.

Q: The cost of the conversion will be about £60,000 can I get any tax relief for this?

 A:  If the conditions are met, yes.  Assuming you are a 40% tax payer, you can reduce your income tax bill by up to £24,000 in the year in which you incur the expense. The main conditions are as follows:

 • The properties must be on a traditional shopping street, and have been built before 1980

• They must not have more than 4 stories above the ground floor

• The upper floors must have been intended for residential use when first built, even if that use has ceased, and they must have been unoccupied for at least one year when you start the work

• You can claim the costs of building work, new kitchens and bathrooms and other capital expenditure involved in the conversion

 Q: Anything else I need to think about?

 A: Yes – you may also be eligible for a similar kind of relief on your costs for renovating the downstairs shops.  The availability of Business Premises Renovation Allowance was extended last year to 2017 and may apply to renovation expenditure on the shops.  There are, as always, some conditions, the main one of which is that the premises must have been unused for a year to qualify.

 In both cases you will need to make a claim for a special type of ‘Capital Allowance’ on your tax return for the period during which the conversion takes place. In all probability you will need an accountant who specialises in advising the property sector to guide you through the process.

Contact us on 0151 228 8977 if you would like our help.