Urban Renewal Relief -Multi-storey Car Parks

Introduction

Section 41B, Finance Act 1994 (introduced by Section 35, Finance Act 1995), extends the 1994 Urban Renewal provisions to certain multi-storey car parks. This article gives details of the incentives available for expenditure on the construction or refurbishment of a multi-storey car park.

Definition of a Qualifying Multi-storey Car Park.

In order to qualify for the incentives a multi-storey car park must:

• be certified by the local authority in whose functional area the car park is located
• consist of two or more stories, and those two or more stories must be used exclusively for the provision of car parking space to members of the public generally.

A car park located over a commercial premises, such as ground floor retail units or offices, will qualify once it meets the conditions outlined above. In such circumstances, only the expenditure on the car park will qualify for the incentives. The expenditure on which relief is being claimed must be apportioned so as to exclude the expenditure on the commercial premises.

The Certification Process

In order to qualify for the incentives, the developer of a multi-storey car park must obtain a certificate from the local authority in whose functional area the car park is located, certifying that it has been developed in accordance with criteria laid down by the Minister for the Environment.

These criteria relate to:

• planning and design,
• traffic and parking anagement policies, and
• pricing structures and hours of operation.

It is not necessary that the multi-storey car park be located in an area designated for Urban Renewal.

The question of whether to issue a certificate is one for the appropriate local authority to which any queries on the certification process should be directed.

The certificate will take the form of a letter from the local authority to the developer. It will confirm that the car park has been developed in accordance with the criteria laid down by the Minister. (Guidelines on these criteria are available from the Department of the Environment.)

The Incentives

Capital Allowances

50% of expenditure incurred in the qualifying period on construction or refurbishment of a qualifying multi-storey car park qualifies for industrial buildings allowances. The rates are:

Owner-occupier:

50% free depreciation, or 25% initial allowance and 2% annual allowance on the remaining 25%,

Lessor:

25% initial allowance and 2% annual allowance on the remaining 25%.

Expenditure on the refurbishment of an existing multi-storey car park will qualify for capital allowances only if it amounts to 20% or more of the market value of the car park prior to refurbishment.

Balancing Charge

Where an event which would otherwise give rise to a balancing charge occurs, in the case of a qualifying building, no balancing charge can be imposed where the event occurs more than 13 years after:

• the building is first used in the case of construction expenditure
  or
• the incurring of the expenditure in the case of refurbishment.

Notwithstanding this restriction on the imposition of a balancing charge the building still has a 25 year “life” for the purposes of industrial buildings allowances. There is no prohibition on the granting of a balancing allowance after the expiry of the 13 year period.

Double Rent Deduction

A double rent deduction, for which Section 42, Finance Act 1994 makes provision, is available to the lessee of a multi-storey car park, subject to the usual conditions, i.e.

• construction or refurbishment expenditure, which is capital in nature, must be incurred on a qualifying building in the three year qualifying period
• the lease under which the rent is paid must be entered into during the three year qualifying period
• the lease under which the rent is paid must be on bona fide commercial terms.
• the lessor and lessee must not, directly or indirectly, be connected with each other.

Qualifying Period

The legislation runs for the three year period from 1 July 1995 to 30 June 1998.